Budget Update

Edmund Andrews of the NYTimes writes about the impact that Katrina will have on Bush’s economic agenda. With estimates from Washington yesterday that Katrina may cost the federal government $100 billion or more, the fiscal picture certainly does look a bit darker than it did just two weeks ago.

Assuming that about $75 billion of that money is allocated in fiscal 2006, the CBO estimates that the on-budget deficit next year will be in the neighborhood of $580 billion (producing a headline unified budget figure of about $390 bn). This does seem to make it likely that the political support for additional tax cuts will be muted in 2006… though that’s never really stopped the Bush administration before…

Anyway, here’s a picture showing what the budget deficit will look like in the next few years, based on last month’s updated estimates by the CBO, including the Bush administration’s goals of repealing the estate tax, making the 2001 and 2003 tax cuts permanent, and fixing the AMT problem.

The fact that the huge 2005 deficit will be somewhat smaller than 2004’s record deficit is almost certainly an aberration, not the start of a trend toward lower deficits.

Is there anyone left who can still take seriously Bush’s pledge to halve the deficit by 2009?