Interview: Director of the White house Office of Management & Budget
>> welcome back. i’m michael mckee. the white house has cut its estimate for this year’s deficit to $333 billion. that’s 23% lower than the office of management and budget’s february forecast of $427 billion deficit. joshua bolton is director of the white house office of management & budget. he joins us from the white house. thank you for joining us, mr. director. analysts say we don’t know for sure why tax receipts are up so much and the deficit is falling. they suggest a number of one- time reasons. is it too early to celebrate? your own projections show it going up in the next fiscal year.
>> it is time to recognize that the president’s policies are working, that at tax relief in particular which was an essential part of the president’s economic growth plan restored growth to the economy, has restored jobs to the economy. as a result we have more revenues coming into the treasury and we’re able to project reducing the deficit faster than we originally projected it.
>> deficit projections don’t include spending for military operations in iraq and afghanistan. in terms of the bond market a, actual indebtedness that you have to fund, too early to celebrate?
>> no, i don’t think so. the numbers we put out today of oeur expectation a of the deficit in 2005 which is down to 2.7% of g.d.p., that number includes all of the costs we expect in 2005 including the cost from iraq and afghanistan. so those numbers are solid, they’re good. it’s good news for the economy. and the rest of the budget path that we laid out in our announcements today, out for 2010 show a steadily declining path down to somewhere near 1% of g.d.p. by 2009 and 2010. it may be we’ll be somewhat above or below, but i don’t think there’s anything in the numbers that don’t suggest we’re not on the strong solid path regardless of how much additional needs to be spent in fighting the war on terror or other contingencies that might come up.
>> you’ll be closer to phaoegt the president’s goal of cutting the deficit in half as a percentage of g.d.p. are you commited to keeping it there? will the president submit no budget that moves you in the other direction?
>> i don’t anticipate any situation in which the president will be proposing something that moves us in the other direction. on the contrary. i expect the president’s budgets and his proposals will be designed to keep us well on that path which we’re ahead of pace on right now to cut deficit in half by 2009. looks like we’ll do better than that. that’s what today’s numbers show. and the most important thing they show is the policies in place now are working. they need to be sustained.
>> are you confident that congress will heed the president’s request to hold the line on spending as they work on the speping bills for next year?
>> they have done well so far. last year’s budget came in roughly at the levels that the president asked for. this year the president asked for a tough budget. he said keep discretionary spending no higher than the rate of inflation and the non- security elements of that spending actually cut it. house of representatives passed appropriation bills that he meet the targets that the president asked for. tougher in the senate where the situation is different. so far i think we can say congress is on a pretty good path. i’m optimistic of being able to continue to hold the line on spending which is a crucial element of bringing the deficit down. not just getting revenues up. we need to keep spending at a reasonable level.
>> only 30 seconds left. no progress on social security reform. what happens to the deficit in that case?
>> there aren’t substantial effects on the deficit in the short to medium run from social security. ‘ president’s plan is implemented, likely to be transition financing costs in the midyears but those don’t increase the debt of the united states because all we’re doing is bringing forward an obligation that the government owes. if we don’t address social security and take on this huge unfunded liability, the long- term dangers in our system will remain. the announcement today suggests that our short and medium term budget picture looks very good. long-term budget picture does not look good unless we take on entitlements like social security.
>> thank you, joshua bolten. back to you, ellen.
>> ok, mike. thanks to both of you for that. we take a break and come back with world and national news.
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Listen Market briefing --- Ellen (slow)
Chart of the day --- Tom (slow)
>> we told you a few moments ago that the white house budget officials are cutting estimates to $333 billion. what about the longer term outlook? goldman sachs does disagree with the bush administration officials and that is subject of “chart of the day.” here to explain is tom keenen. a colorful chart awaits us.
>> we have colorful debate today. you just had joshua bolten on in the show. i spoke with joel caplin his assistant. and you get the white house spin. the o.m.b. is within the white house, clearly it’s their moment of glory, lower deficit. some people disagree.
>> tell us what this says.
>> this is tax receipts as a percent of g.d.p. this is the economic revolution of the bush administration. here is a high percentage of taxes. as a percent of g.d.p. at the clinton years, here is this collapse due to the tax cuts, recession as well. down we go, way outside the 50-year trend line. that’s what the red lines are. two deviations outside that. many people say thing has to come back up. that will be the debate in the next couple of years.
>> has to come back in order for what?
>> some say it dosen’t have to come back. the bush administration would say we need to make the tax cuts permanent to keep it down near that. that will boost economic growth, tax revenues will rise and that will lower that budget deficit. others disagree. saying these are a temporary one-off tax cut. they’re worried about a slippage in spending restraint because of today’s good news. congress may want to spend more money because of the better numbers. what it sums up to is this is maybe the beginning of a political debate as we move to twix and on to 2008.
>> one thing that intrigues me is why are the war numbers not included for afghanistan and iraq, and is that a fair representation?
>> i would say yes and no. i asked joel the same question. he said some of the war budget is within the numbers that we saw today. clearly not all and most particularly not the future budget. but it’s not just iraq and afghanistan. what goldman sachs is saying is it’s iraq and afghanistan down the road, off the balance sheet. also what we’re seeing is entitlement programs off the balance sheet. some of the medicaid and medicare expenditures down the road. so there’s a number of ideas in spending that aren’t in those budget corrections, and this is strong language. we differ on the longer term outlook. that’s strong language in the world of economics.
>> and where is the improvement in the tax receipts coming from?
>> corporate taxes much better than people expected. also, individual taxes from asset economies, the housing boom, the stock market boom of this year. those individual income receipts have come in and say they may be temporary.
>> tom, thank you.
>> sure.
>> interesting. let’s turn our attention to world and national news. william rehnquist is hospitalized today.
>> a spokeswoman says that justice rehnquist was take on the a hospital in washington overnight with a fever and was admitted for observation and testing. mr. rehnquist suffering from thyroid cancer and has been undergoing radiation and chemo treatments. but he had been going to work every day despite his illness and intense speculation that he would soon retire from the bench. at least 24 civilians, many of them children, were killed in a car bombing in baghdad. u.s. and iraqi officials say a suicide bomber detonated the device in a crowd of children surrounding a u.s. military humvee. a u.s. soldier was among those killed in the attack. at least 17 civilians were wounded. the attack came on a day when the iraqi government cut baghdad’s curfew by an hour citing improved security conditions. no blastoff today and nasa now says the shuttle discovery won’t launch until monday at the earliest.
