Budget Update Show Deficit Goal Being Reached Early

President George W. Bush's administration will report this week that surging tax revenue is shrinking this year's budget deficit from the record 2004 level, possibly by as much as $90 billion, giving him a shot at fulfilling his deficit reduction promise three years early.

With tax revenue running $1 billion a day ahead of the 2004 pace in late April and May, the deficit will likely decline to about $325 billion from $412 billion last year, according to the Congressional Budget Office and private forecasters such as Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

``An expanding economy, creating more receipts, is putting us on a very good path to deal with our deficit,'' Treasury Secretary John Snow said at a press conference in Calgary on July 8. ``It's pretty clear now the path we are on will take us below the president's initial target.''

Bush promised during his election campaign last year that he would pare the annual deficit to about 2.25 percent of the nation's gross domestic product by 2009.

As recently as February, the government was projecting the deficit would rise this year to $427 billion, or about 3.5 percent of the nation's gross domestic product. Some economists, including Mike Englund of Boulder, Colorado, research firm Action Economics LLC, now predict the shortfall will drop to 2.5 percent of GDP this year and as low as 2.0 percent next year. That would mean a deficit next year as low as about $250 billion.

the first eight months of the fiscal year the deficit was $272.2 billion, down from $346.3 billion at the same time last year, the Treasury said in a June 10 report. The monthly deficit fell to $35.3 billion in May, a bigger improvement than economists expected and the smallest gap for the month since 2001. Revenue rose 32 percent, with tax receipts from individuals surging 88 percent from May 2004, the biggest jump in five years. Spending increased 5.7 percent.

``Given the pace of income, wage and salary growth, there'll be plenty of money in the coffers,'' said Rich Yamarone, director of research at Argus Research Corp. in New York. ``I wouldn't be surprised with a $100 billion narrowing.''