Press Briefing by Director of OMB Rob Portman on the Budget

Business Wire, July 11, 2007

WASHINGTON -- Room 350

Eisenhower Executive Office Building

2:02 P.M. EDT

DIRECTOR PORTMAN: What I'd like to do today is just briefly go over the mid-session review. You all have it now, I assume. I also have given you some charts or slides to take a look at within this packet. The first one is the one in the -- this is the same chart you've seen many times, which is comparing the budget deficit over time, starting with 2004, up to 2012, the balanced budget. That's the first chart that should be in your packet.

What it shows is that this year the deficit projection we're making in the mid-session shows a substantial improvement, largely driven by revenue growth. Does this sound familiar? It's what happened a year ago. It's also what I predicted was likely to happen again this year, which is why I hope none of you are going to write that story about how Portman sandbagged us in February.

Specifically, we estimate the deficit will be $205 billion this year, which is down to 1.5 percent of GDP. This is a $39 billion decrease from the projection we made in February, about a 16 percent reduction. It's a $43 billion decrease from the deficit last year, so an 18 percent reduction in the deficit, year to year.

We'll see where we come out on October 1st. My own view is this is cautious, once again, giving you a fairly conservative estimate. I say that not so much because of the revenue side, in this case, because I think our revenues we have a pretty good handle on. But I think in terms of outlays, we have historically not been able to predict accurately what the agencies will actually spend within the fiscal year. And if you look at last year's data, for instance, we were about $35 billion off -- is Beth here? Is that right? What was our final last year, about $35 billion -- of outlays?

MS. ROBINSON: A little bit more than that; almost $40 billion.

DIRECTOR PORTMAN: Almost $40 billion. So we do our best with the agencies and try to give you the best data we have, the best estimate -- but don't be surprised if on October 1st this estimate looks closer to what CBO is projecting under 200.

But this is great news. It's good news for the American taxpayer, it's good news for fiscal discipline. It shows that the economic plan is working. Since peaking in 2004 in this administration at $413 billion, it's a decrease in the deficit of $208 billion. So in the last three years the deficit has decreased by $208 billion, based on this projection, which, again, I think is a cautious projection. But this is real. This is not projections, surpluses or deficits -- this is saying what's actually happened the last three years, and we've seen a steep decline in the deficit.

More important to me is that at 1.5 percent of GDP, as the economists around the table -- at least one economist around the table -- will tell us, this means it's not having a major impact in terms of our economic growth. This is the number that economists tend to focus on. And the 40-year average is 2.4 percent. This makes this deficit lower than deficits in 18 of the past 25 years.

Thirty billion dollars of the decrease is from corporate -- or the increase in revenues, and therefore, the decrease in the deficit -- $30 billion of the nearly $34 billion in higher receipts is from corporate receipts. So it's higher corporate profits. So corporate receipts are coming in higher than we expect that they would. Outlays are also down a little bit, about $6 billion down from our February estimate. Primarily this is in terms of our new estimate on outlays -- mostly DOD. I don't think they're going to spend that as fast as we thought that they would. But this reduction is being driven as it was last year, by revenue.

The out-years, interesting story: 2008 you'll see the deficit projection is actually up a little bit from our estimate that we had in February. It's up $19 billion, to $258 billion. It's increased because we believe that additional spending will drive that deficit up a little more than we had projected previously. It is two sources, almost equal. One is the spending in the supplemental. Remember, there was $17 billion in the supplemental that we did not request; $10 billion of that is spent out in 2008, not 2007. So most of that spending occurs in 2008, and that's just $10 billion on top of our projection that we had not expected, because we had projected that we would keep the supplemental to our request.

Second is higher numbers on Medicare and Medicaid. You'll see in the mid-session review -- this is spelled out in the charts -- but about $12 billion equally divided between Medicare and Medicaid is due to the actuaries telling us that they think that the costs will be higher in those entitlement programs. This is primarily driven, we're told, on the Medicare side by fee-for-service; Medicaid side, just general health care cost increases. This is only since February we're seeing this increase in the estimate for '08, and, again, makes the point that we have to get entitlement spending under control, as well.