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Treasury denies report that deficit paper was 'shelved'

From Suzanne Malveaux and Tim McCaughan
CNN Washington Bureau

Recent study says Social Security, Medicare shortfalls could be far bigger than previously thought.
Recent study says Social Security, Medicare shortfalls could be far bigger than previously thought.

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WASHINGTON (CNN) -- The Treasury Department Thursday denied a report that the White House suppressed a paper estimating the United States is facing at least a $44.2 trillion deficit due to future health care and pension obligations. (Full story)

London's Financial Times said in its Thursday edition that the Bush administration "shelved" the report "commissioned by then-Treasury Secretary Paul O'Neill" and written by former Treasury official Kent Smetters and former Treasury consultant Jagdessh Gokhale.

According to the Financial Times, the report shows the U.S. government is threatened with being overwhelmed by the future health care and retirement costs of the "baby boomer" generation.

The study concludes, according to the report, that sharp and permanent tax increases or massive spending cuts -- or a combination of both -- are unavoidable if the United States is to meet the health care and retirement benefits promised to future generations.

But chief Treasury spokesman Rob Nichols said the paper was written after the officials left the government and does not reflect the thinking of the president's team.

"This does not represent the views of the Bush administration. We have no association with it. It is not endorsed by us," he said.

White House spokeswoman Claire Buchan reiterated Nichols' statements, saying Smetters' conclusions are "not a Treasury report."

Nichols said the authors wrote the report after they left the Treasury Department last August. "This paper was not prepared at Treasury, by Treasury, or at the request of anyone at Treasury," Nichols said. "It was prepared after the individuals in question went back to the private sector."

But Smetters told CNN the report had been requested by O'Neill. He said it was delivered to current members of the Bush administration.

He said he and Gokhale had hoped it would be included in Bush administration policy, but after John Snowe took over as Treasury secretary, they were told that would not happen.

Smetters said he did not believe the administration officials shelved the paper because of the president's tax cut plan. He said the problems are too long-term.

"Our views on this matter are reflected in the president's budget in a chapter titled 'The Real Fiscal Danger,'" Nichols added. The deficit figure given in the budget is $18 trillion, Buchan said.

"The [Financial Times] didn't even bother to call us here to check facts or get a comment, said Nichols.

The newspaper said the Smetters' report was being circulated Wednesday to Washington think-tanks as the president was signing the $350 billion tax cut package, which he touted as a stimulus for the American economy.

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