White House sees 2006 budget gap over $400 billion

WASHINGTON (Reuters) – The White House projected a 2006
budget deficit of more than $400 billion on Thursday, a sharp
increase over a July forecast, and blamed the surge largely on
costs of recovering from Hurricane Katrina.

The new deficit projection was likely to further intensify
an election-year debate about whether to renew President George
W. Bush’s tax cuts that he says are essential for maintaining
economic growth but which Democrats say are a drain on federal
coffers.

The deputy director of the White House Office of Management
and Budget, Joel Kaplan, said White House officials believed
that by sticking to Bush’s economic policies and spending
restraint “we will return to our downward trajectory and remain
on path to cut the deficit in half by 2009.”

A July forecast had projected the 2006 budget deficit at
$341 billion. Kaplan said preliminary calculations indicate the
deficit will exceed $400 billion, or 3.1 percent of gross
domestic product.

Kaplan said the costs of recovering from Katrina and a
second hurricane, Rita, represented a “temporary event.”