Bush hails tax cuts as deficit dips

WASHINGTON — Strong tax revenue has helped shave the federal budget deficit to its lowest level in five years, President Bush said Wednesday, seizing on the news as an opportunity to go on the offensive against Democrats for refusing to make permanent the tax cuts he said were working.

New estimates from the Treasury Department projected the deficit for this fiscal year, ending Sept. 30, at $205 billion, down from $248 billion last year and half the peak of $413 billion that it reached in 2004. Administration officials said the better number was due to stronger than expected personal paychecks, corporate earnings and capital gains.

The new figure was still above estimates of the Congressional Budget Office and some private firms, which have reported that the deficit could be in the range of $150 billion this year. The Treasury's assumptions in projecting the deficit tend to be conservative, a practice that in the past has allowed Bush to claim that budget expectations have been surpassed.

"The policies of low taxes and spending restraint have produced a clear and measurable record of success," Bush said in a budget talk Wednesday at the Eisenhower Executive Office Building, next door to the White House.

"Yet, in the face of all the evidence, Democrats in Congress still want to take us down a different path," he said, citing plans including what he described as "the largest tax increase in history," a reference to Democratic intentions to let some of his tax cuts, themselves the largest in history, expire at the end of 2010.

Bush said the nation was on track toward his goal of eliminating the deficit by 2012, when, he said, there will be a surplus of $33 billion. But that assumes in part that there are no unexpected costs related to military operations in Iraq and Afghanistan.

One set of figures from the Congressional Budget Office also predicts a 2012 surplus, in part under the assumption that the tax cuts expire as scheduled. But another set, which assumes a continuation of the tax cuts as Bush is calling for, projects a deficit.

Bush and his political aides have long struggled to promote any positive economic data, an inclination that officials have partly attributed to a sort of referred pain from the war in Iraq, which has fed an overall feeling of public negativity, according to pollsters.

The president's announcement on Wednesday gave fellow Republicans, who are as thirsty for good news as he is, something to herald, with Republican allies like Sen. Jon Kyl of Arizona calling it "yet more evidence that Republican tax relief has been good for our economy."

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