White House aide sees improved U.S. Budget picture

WASHINGTON – In his first major speech as White House economic adviser, Ben Bernanke predicted on Tuesday that the 2005 U.S. budget deficit could come in “well below” previous estimates because of robust tax revenue.

Estimates of wage and salary income have been lifted “substantially” and it is possible that the labor market is stronger than previously thought, said Bernanke, a former Federal Reserve governor who last month became chairman of the White House Council of Economic Advisers.

“One consequence of the strong income growth we are enjoying is higher-than-expected levels of tax collections so far this year which, if maintained with spending controls, will reduce the government’s budget deficit for this year well below its projected level,” he told the American Enterprise Institute, a conservative think tank.

Bernanke said the administration would be monitoring the booming U.S. housing market, which Federal Reserve Chairman Alan Greenspan has said shows signs of “froth.”

Bernanke said “speculative behavior” appears to be surfacing in some local housing markets, but a good deal of its strength is tied to economic fundamentals such as low interest rates and rising incomes.

“The administration will continue to monitor these developments,” Bernanke said. But he added the best defenses were vigilant lenders and bank regulators and “good sense on the part of borrowers.”

Regarding the government’s budget numbers, Bernanke did not offer specifics ahead of the government’s “midsession” update, which is scheduled to be released at 11:30 a.m. EDT (1530 GMT) on Wednesday.

The White House earlier this year projected a $427 billion shortfall for the fiscal year that ends Sept. 30, up from 2004’s record deficit of $412 billion. Some private analysts have projected a 2005 gap in the area of $350 billion.

Bernanke and other White House officials have touted progress in the budget situation as a sign President Bush’s tax-cutting policies are working.

However, some private economists have argued that at least part of the improvement is a temporary windfall from factors such as last year’s buoyant stock market.