The
administration will spend during fiscal 2004 only $50 billion to
$60 billion of President Bush's $87 billion supplemental spending
request for Iraq and Afghanistan, resulting in a rise of the
Office of Management and Budget's projected projected federal
deficit to no more than $535 billion from the currently predicted
$475 billion.
The increase nevertheless plunges the deficit even further into
record territory, increasing the projection for 2004 from about
4.2 percent of gross domestic product to 4.7 percent, according to
senior officials who briefed reporters by telephone Monday
afternoon. One official argued that the increase would still leave
the deficit at a level that does not harm the economy.
The official said Bush will not seek to balance the proposal
with either offsetting spending cuts or a rollback of his tax
cuts. The official asserted that much of the new funding is
one-time spending that will not be incorporated into the budget
baseline.
The new deficit level is "manageable," the official said, if
Congress holds the line on discretionary spending and enacts
pro-growth policies that the administration believes will help
increase revenues and ameliorate the deficit.
In a statement sure to rankle Democrats, the official suggested
that one such pro-growth policy would be to make the 2001 tax cut
permanent, a strategy that would—initially, at least—add hundreds
of billions of dollars to the deficit after 2010, when the tax
cut's provisions expire.
The senior officials said $62.5 billion appropriated by
Congress this spring for war-related costs will be exhausted
either by the close of this fiscal year or early next month.
However, while Bush wants Congress to act with dispatch on the
supplemental request—and to certainly complete it before
recessing—the need for the money does not arise before the end of
the calendar year, one official said.
But the official declined to say when Bush would officially
submit the proposal, indicating that aides were still tinkering
with some of the finer points.
The official indicated that the administration will seek
"flexibility" from Congress in how a substantial portion of the
money is spent.
The senior officials acknowledged that the proposal is larger
than anticipated months ago. They blamed the unexpectedly
miserable state in which Iraq's previous regime left the country.
"It's difficult to underestimate the amount of underinvestment
in Iraq's infrastructure," said one official.
One official said Iraqi energy generation should be at prewar
levels by the end of September, but that output will still have to
increase to meet the country's current needs.
But the officials indicated that $20 billion of the proposal
requested to rebuild Iraq should help get the country up and
running to the point where Iraqis can then take over a substantial
role themselves.
The $20 billion is part of $50 billion to $75 billion the
administration estimates is needed for Iraq's infrastructure.
Other funding will come from oil revenues, which the officials
estimated will total $12.1 billion in 2004 and $20 billion in both
2005 and 2006.
But the administration is also seeking "substantial"
contributions from other countries.
One official said that since the $50 billion to $75 billion—as
well as the $20 billion in U.S. money that will be part of it—is a
type of "capital investment" needed to get Iraq on a solid
footing, the money should not be tagged to any specific time
period.
The official said he expected that the request would include
language asking that disbursement of the $20 billion not be
limited to 2004, though the administration would seek to spend it
during 2004 if possible, in order to improve conditions rapidly.
The official reiterated earlier comments by White House Press
Secretary Scott McClellan, who said he does not expect further
such request for 2004.
"I think you can never say never, but we do not anticipate
coming back for supplemental requests for Iraq or Afghanistan
either on the military side or the reconstruction side for fiscal
'04," the official said.
