updated 3/2/2007 3:18:11 PM ET 2007-03-02T20:18:11

President Bush’s proposed federal budget is based on too-rosy revenue estimates and would probably not produce its advertised surplus of $61 billion in five years, according to new estimates from the Congressional Budget Office.

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Instead, Bush’s February budget plan would produce a $9 billion deficit by 2012 if it were to be enacted, CBO maintained.

The largest reason for the differences between the CBO and White House estimates are revenue projections. CBO sees revenues $119 billion lower in 2012 than does the administration’s Office of Management and Budget.

But in a federal budget totaling about $3 trillion, the differences between the CBO and White House estimates are quite modest. Underscoring the difficulty of longer-term budget projections, CBO says there’s an equal chance that the Bush budget would generate a surplus in 2012.

The new estimate is largely an academic exercise since the Democratic-controlled Congress is mostly ignoring Bush’s budget and Democratic leaders have said that major initiatives are dead on arrival, such as treating health insurance benefits as taxable income.

That Bush proposal, coupled with a standard tax deduction for those who buy health insurance, amounts to a big tax increase _ totaling $557 billion over 10 years _ according to congressional estimators. Bush’s budget assumes the two proposals combine to cut taxes.

Democrats say Bush’s budget is unrealistic since it excludes Iraq war costs after 2009 and fails to fix the alternative minimum tax to prevent more and more comfortably middle-class taxpayers from having to pay it.

Democrats are preparing the annual congressional budget resolution for debate later this month, and they’ve signaled that their plan will produce a balanced budget by 2012. They will assume greater tax revenues obtained through tax loophole closing and improved tax collections _ though Republicans say those assumptions would, in fact, amount to a tax hike.

For its part, the White House and congressional Republicans welcomed the CBO report, despite its slightly more pessimistic projections.

“It shows, unequivocally, that we can balance the budget in five years without raising taxes,” said Rep. Paul Ryan of Wisconsin, top Republican on the Budget Committee.

“OMB and CBO have produced estimates of the president’s budget that are very close,” said OMB Director Rob Portman. “The differences between us primarily results from our different economic assumptions. Even so, CBO shows that, under the presidents budget proposal, deficits will decline substantially over the next five years and approaches virtual balance in 2012.”

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