Back to Work: For the Winner, a U.S. Economy With Some Stubborn Problems

On the To-Do List: Deficits, Health Care and Oil Prices; A Twin Threat From China: Staving Off a Dollar Dive

Author: David Wessel and Bob Davis

Published: November 3, 2004

... As long as the economy grows at the 3.5% annual pace expected by private forecasters, the White House should have little trouble devising a budget that projects a smaller deficit for next year than this year. That would be accomplished with a budget that simply extends this year's efforts, estimate Brookings Institution economists William Gale and Peter Orszag. Cutting the deficit in half, as both candidates pledged, is harder. ...

... The latest fix expires at the end of 2005. The next year, according to Leonard Burman of the Urban Institute think tank, 18.6 million Americans will be hit by the AMT's higher tax rates, up from 3.4 million in 2005. On the other hand, a permanent fix would cost more than $500 billion over 10 years, Mr. Burman estimates, roughly equivalent to the 10-year price of the new Medicare prescription drug benefit. With neither option palatable, the president could seek a more sweeping reform of the tax code. ...