WASHINGTON — The White House predicted Monday that President Bush would leave a record $482-billion deficit to his successor, a sobering turnabout in the nation's fiscal condition from 2001, when Bush took office after three consecutive years of budget surpluses.
The worst may be yet to come. The deficit announced by Jim Nussle, the White House budget director, does not reflect the full cost of military operations in Iraq and Afghanistan or the possibility of steeper losses in tax revenues if individual income or corporate profits decline.
The new deficit numbers also do not account for any drains on the national treasury that might result from further declines in the housing market.
The White House forecast was prepared before passage of the huge housing assistance package that Bush has promised to sign. That legislation would put taxpayer money at risk in numerous ways, especially if housing prices continue to decline.
Nussle predicted Monday that the deficit would more than double in the current 2008 fiscal year — to $389-billion, from $162-billion in 2007 — before shooting up to $482-billion in the 2009 fiscal year, which begins Oct. 1.
The deficit projected for 2009 would be the largest in absolute terms, easily surpassing the record of $413-billion in 2004. The White House and many economists prefer to measure the deficit as a share of the economy. The projected 2009 deficit would be 3.3 percent of the economy. That is the largest share since 2004, but well below the percentages recorded in the 1980s and early 1990s. In 1983, the deficit was 6 percent of the overall economy.
The bleak outlook for the budget will crimp the ability of the next president to carry out ambitious spending plans. And it adds to fiscal pressures that were already building because of the growth of Medicare and Social Security.
Sen. John McCain, the presumptive Republican presidential nomination, said the new report showed "the dire fiscal condition of the federal government."
"There is no more striking reminder of the need to reverse the profligate spending that has characterized this administration's fiscal policy," McCain said.
Jason Furman, the economic policy director for the campaign of Sen. Barack Obama, the presumptive Democratic nominee, said Obama would cut wasteful spending, close corporate tax loopholes and roll back tax cuts for the wealthiest Americans, "while making health care affordable and putting a middle-class tax cut in the pocket of 95 percent of workers and their families."
The new estimate of the 2009 deficit was $74-billion higher than Bush and Nussle had predicted in the president's budget just six months ago.
Nussle said the deterioration of the fiscal outlook resulted from "a softening of the economy" and a reduction in anticipated revenue. He attacked congressional Democrats, saying they had allowed spending to grow out of control.
Rep. John Spratt Jr., D-S.C., chairman of the House Budget Committee, said the new deficit figures confirmed "the dismal legacy of the Bush administration."
"Under its policies," Spratt said, "the largest surpluses in history have been converted into the largest deficits in history."
Nussle asserted that Bush had inherited a recession and had to make up for years of inadequate spending on the military, intelligence and homeland security under President Bill Clinton.
The recently passed housing bill authorizes the Treasury Department to spend virtually unlimited amounts to rescue the nation's two mortgage finance giants, Fannie Mae and Freddie Mac, should they be at risk of collapse. The Congressional Budget Office estimated the new rescue authority could add a total of $25-billion to the deficit in the next two years.
The budget office said there was a better than even chance the rescue authority would not be used, so there would be no cost. On the other hand, it said there was a 5 percent chance that one or both of the mortgage giants would need such assistance to cover as-yet unrecognized losses greater than $100-billion.
When Bush took office, he predicted that federal debt held by the public — the amount borrowed by the government to pay for past deficits — would shrink to just 8 percent of the gross domestic product in 2009. He now estimates that it will amount to 40 percent.