Budget deficit expected to drop

WASHINGTON -- After three years of steadily climbing budget shortfalls, President Bush finally had some good fiscal news yesterday: Surging revenues and a steady economy have led to a steep drop in the expected deficit for this year.

The annual White House midyear budget report projects that this year's deficit will drop to $333 billion, $79 billion below last year's record red ink and almost $100 billion less than earlier estimates.

Bush said the improving deficit picture vindicated his stewardship of the economy and budget.

''These numbers indicate that we're going to cut the deficit in half faster than the year 2009 -- so long as Congress holds the line on spending," Bush said after a Cabinet meeting.

Democrats on Capitol Hill countered that the deficit for the budget year ending Sept. 30 would still be the third-largest ever and that the use of $173 billion in surplus Social Security taxes hides the true deficit. ''The debt is going up like a scalded cat," said Senator Kent Conrad of North Dakota, ranking Democrat on the Senate Budget Committee.

Just five months ago, the White House predicted a $427 billion deficit for the year and red ink totaling $1.1 trillion over five years.

Last year's deficit of $412 billion was a record in dollar terms, though many previous deficits in the mid-1980s and early 1990s were larger when measured against the size of the economy.

The new estimates reflect significant improvement in revenues, which so far are coming in at levels 15 percent higher than last year.