by Joshua B. Bolten
Director, The Office of Management and Budget
Friday, July 30, 2004
and Gentlemen, thank you for coming to this briefing on OMBs annual
Mid-Session Review. Ill begin with a short statement, and then
Ill be happy to take your questions.
released the Presidents Budget for 2005 in February, we highlighted
its support for the Presidents three overriding priorities: winning
the war on terror; protecting the homeland; and, strengthening the economy.
At that time, I also explained how, with continuation of the Presidents
pro-growth economic policies and sound spending restraint, we could meet
these national priorities while cutting the deficit in half within five
am pleased to report that, because the Presidents economic policies
are working, we are ahead of pace to meet the goal of cutting the deficit
in half within 5 years.
the President and the Congress acted and let the American people keep
more of their own money to save and invest, our economy is strong and
growing stronger. Even with the preliminary estimates of second quarter
growth released today, the economy grew at 4.8 percent over the last year,
one of the fastest rates of growth in the last 20 years. Economists project
further solid growth for the remainder of this year and into 2005. We
have seen the U.S. economy generate more than 1.5 million new jobs since
last August including nearly 1.3 million jobs since the beginning
of this year. Unemployment, interest rates, and inflation are all currently
below the average rate in each of the last three decades. Gains in investment
and household wealth, all of which have been stimulated by tax relief,
have also generated greater economic activity than previously expected.
Because of this growing economy, and the Presidents emphasis on spending
discipline, I can report today that our budgetary outlook has improved considerably
from just six months ago. In the Mid-Session Review, our projections for
the combined deficits this year and next are lower by a total of more
than $100 billion.
The deficit for 2004 is now estimated at 3.8% of GDP, or $445 billion
a decline of 0.7percent as a share of GDP and $76 billion
in nominal terms from our forecast in February. The deficit projection for
2005 has been reduced by 0.3 percent of GDP, or $32 billion.
Further, but somewhat smaller reductions in the deficit from the February
estimates are projected for the years 2006 through 2009. If the economy
performs better than the conservative forecasts and cautious estimating
assumptions we include for the outyears, then the deficits could well be
below the level projected today.
budget outlook is the direct result of the strong economic growth the
Presidents tax relief has fueled. The Mid-Session Review shows
receipts rising above our previous estimates by $76 billion in 2004 and
$55 billion in 2005.
MSR reverses the recent trend of receipts coming in well below projections
due to the economic downturn that began in 2000 and the attacks of September
11, 2001. As an example, the MSR released last year showed that receipts
had fallen $80 billion below the levels projected in the FY 2004 Budget.
In contrast, this years MSR estimates receipts at $76 billion above
their February projected level. In view of the broad-based and sustained
economic recovery that we have seen over the last year, it appears that
federal revenues are very likely to continue their strong growth in fiscal
2004 and 2005 and perhaps well beyond.
to reflecting changes in receipts estimates, this Mid-Session Review also
includes several changes in our outlay projections. In Social Security,
for example, higher cost of living adjustments related to slight increases
in projected inflation add $59 billion to our 5-year estimates. Similarly
for Medicare, the HHS actuaries have increased their estimates for the
5-year cost of the entire Medicare program by $67 billion.
our budget picture has improved significantly since the release of the
Presidents Budget in February, todays deficits remain unwelcome.
These deficits are due to an extraordinary confluence of adversity: the
stock market downturn that began in 2000, and the subsequent recession
that the President inherited as he took office; the terrorist attacks
on America, and subsequent spending for homeland security and the War
on Terror; and the crisis in confidence produced by corporate scandals
years in the making.
relevant perspective on the deficit is in relation to the size of the
Nations economy. By that measure todays deficit, although
unwelcome, is well within historical range. A deficit that is 3.8 percent
of GDP, as we now project for this year, would be smaller than the deficits
in nine of the last 25 years, and far below the peak deficit figure of
6 percent of GDP reached in 1983. This deficit is also in line with what
other industrialized nations are facing today. The U.S. deficit matches
the average deficit within the OECD, and is below the levels of France,
Germany, and Japan.
importantly, because of the ongoing effects of the Presidents pro-growth
economic policies, the deficit is headed strongly in the right direction,
and improving faster than we anticipated just six months ago. Next years
projected deficit, at 2.7 percent of GDP, would be smaller than those
in 14 of the last 25 years.
the continuation of the Presidents policies on spending discipline
and economic growth, the federal deficit will fall to 1.5 percent of the
nations economic output in 2009, well below the 2.2 percent average
deficit of the last 40 years -- and two-thirds smaller than the peak projected
2004 deficit of 4.5 percent of GDP.
that brought us into deficit are not completely behind us. The war on
terror goes on. The recession has long passed, but some industries and
workers are still affected. The President remains committed to fighting
the war on terror to its successful conclusion, and to continuing strong
policies that promote investment, jobs, and growth in every region of
the country and in every sector of our economy. The Presidents
Budget reflects those priorities.
report demonstrates is that if we sustain the path the President has set
for usthe path of pro-growth economic policies and spending restraint--we
can meet our nations priorities and cut the deficit more than in
half within five years.
be pleased to take your questions.