June 9th 2004 - The line is not likely to make this week's eulogies to Ronald Reagan, but when Vice President Cheney allegedly declared, "Reagan proved deficits don't matter," he summed up an enduring argument from the former president's economic legacy.
In late 2002, Cheney had summoned the Bush administration's economic team to his office to discuss another round of tax cuts to stimulate the economy. Then-Treasury Secretary Paul H. O'Neill pleaded that the government -- already running a $158 billion deficit -- was careering toward a fiscal crisis. But by O'Neill's account of the meeting, Cheney silenced him by invoking his take on Reagan's legacy.
It wasn't that Reagan's policies proved that government borrowing had no impact on the economy. But his administration's record -- particularly with some years of hindsight -- did give reason to question traditional thinking and provided a new context for future arguments about deficit spending.
"The lesson we should have learned [from those years] is that deficits have little or no short-term economic impacts," said William A. Niskanen, a member of Reagan's Council of Economic Advisers.
As important, they appeared to have no impact politically, said Stephen Moore, a conservative economist at the Club for Growth who worked in Reagan's budget office.
"Voters and politicians became anesthetized to big deficits," Moore recalled. "Reagan was running these big deficits, and liberals argued it was going to be Armageddon. We were going to ruin the economy. Interest rates were going to go through the roof. And none of these things happened."
The fiscal shift in the Reagan years was staggering. In January 1981, when Reagan declared the federal budget to be "out of control," the deficit had reached almost $74 billion, the federal debt $930 billion. Within two years, the deficit was $208 billion. The debt by 1988 totaled $2.6 trillion. In those eight years, the United States moved from being the world's largest international creditor to the largest debtor nation.
To some economists, the impact was clear. Interest rates rose in the late 1980s and early 1990s, the economy slowed, then slipped into recession, and productivity barely advanced. Americans feared their nation had slipped into the shadows of Japan and Germany.
Reagan's "economic policy . . . was a disaster," University of California at Berkeley economic historian J. Bradford DeLong wrote this past weekend on his Web site. "The tax cuts made America a more unequal place, and the deficits slowed economic growth in the 1980s significantly."
But after the boom years of the 1990s, and the steady economic slides of those international rivals, some economists are reevaluating that version of history. The argument against deficits is more about self-righteous moralism than economics, they say.
The Reagan "experience changed the debate dramatically," said Kevin A. Hassett, an economist at the American Enterprise Institute. "Back then, it seems that everybody believed Reagan must be some kind of kook and the people who agreed with these views were flimflam artists. Not so anymore."
Indeed, since the Reagan years, the argument over the deficit has been turned on its head. In the 1980s, prominent liberal economists dismissed the significance of government red ink to head off the slashing of social welfare spending. Now, many liberal economists have become the fiercest deficit hawks to head off still more tax cuts.
But the shifts go beyond politics. For nearly a century, economic orthodoxy has held that federal borrowing harms the economy by driving up interest rates, diminishing investment and productivity, and placing an unfair burden on future generations, who will finance the spending and tax cuts of the present.
Traditional economists argue that as the government enters private capital markets to finance its deficits, it competes with private borrowers. A deficit equal to 1 percent of the size of the economy -- about $110 billion today -- would slap as much as a full percentage point on the interest rates consumers pay to finance a new home or new car. By that measure, today's deficit would account for nearly 4 percentage points of a 6 percent mortgage.
But the new argument holds that interest rates are set on a vastly larger global marketplace. With rising global prosperity, even a federal deficit as large as the United States' would present little competition for would-be investors. A soon-to-be-published paper by American Enterprise Institute economist Eric M. Engen and Columbia University economist R. Glenn Hubbard, the first chairman of Bush's Council of Economic Advisers, concluded that the record budget deficit of 2004 should raise interest rates by 0.12 percent.
"The world's capital markets are lot more sophisticated and flexible than they were then," said N. Gregory Mankiw, the current chairman of Bush's economic council. "That probably means that other things being equal, changes in domestic fiscal situations have less impact."
Indeed, this school of thought is becoming something of a consensus, Engen said. Deficits equal to 1 percent of the size of the economy should raise interest rates by 0.3 percent, he said. That is the low end of the 0.3 to 0.6 percent range postulated by Brookings Institution economists William G. Gale and Peter R. Orszag when they argued deficits are economically significant.
Benjamin M. Friedman, a Harvard University economist who lamented Reagan's fiscal policies in his 1988 book "Day of Reckoning," said the expansion of foreign credit has tempered the feared hikes in long-term interest rates that he thought would cripple the economy. But, he said, "that doesn't let deficits off the hook."
"It's important to realize that interest rates are set on world capital markets; therefore, a large deficit need not impact capital formation," he said, referring to economic investments in new plants and equipment that drive growth. "But that's identical to saying we will continue to do capital formation, but we'll do it by forever borrowing abroad."
And that spells trouble, said Niskanen of Reagan's Council of Economic Advisers. Debt does have to be repaid, and foreign investors -- primarily the central banks of Japan, Britain and China -- own $1.7 billion of federal debt. That, he said, has made the country "terribly dependent" and "terribly vulnerable."
That is a bipartisan fear. "The key point is, even if it were sustainable, it's not desirable," said Orszag, a prominent Democratic economist. "We still will owe the money to foreigners. We're still mortgaging our future national income. Just because you can take out a larger mortgage to buy a bigger house doesn't mean you should."
Bush sends record $521 billion Deficit to Hill
February 2nd 2004 - President Bush sent Congress a $2.4 trillion election-year budget on Monday featuring big increases for defense and homeland security but also a record $521 billion deficit.
To battle the soaring deficits, Mr. Bush proposed squeezing scores of government programs and sought outright spending cuts in seven of 15 Cabinet-level agencies. The Agriculture Department and the Environmental Protection Agency were targeted for the biggest reductions.
The president declared that his spending blueprint, which will set off months of heated debate in Congress, "advances our three highest priorities" winning the war on terror, strengthening homeland defenses and boosting the economic recovery.
"Our nation remains at war," Mr. Bush declared in his budget message. "This nation has committed itself to the long war against terror. And we will see that war to its inevitable conclusion: the destruction of the terrorists."
The president's plan for the 2005 budget year, which begins next Oct. 1, proposes spending $2.4 trillion for all government activities, up 3.5 percent from the current year. Revenues will total $2.04 trillion, a sizable 13.2 percent increase that the administration forecasts will occur from growing tax receipts powered by a stronger economy.
The budget assumes economic growth of 4.4 percent this year and 3.6 in fiscal 2005. For all of 2003, the economy grew at a 3.1 percent rate.
The president projects the 2005 deficit will be $364 billion, down from a projected record high deficit in dollar terms of $521 billion this year. He pledged to cut that in half over the next five years.
The president's budget states that stronger economic growth and reductions in general government spending will produce steady improvements in the deficit, which the administration projects will fall to $237 billion in 2009.
However, Democrats immediately attacked the spending proposal for what they viewed as harmful reductions in various government programs and the president's insistence on making his 2001 and 2003 tax cuts permanent at a cost projected in the budget of more than $900 billion over 10 years.
"This administration pledged that its tax cuts and policy choices would not turn record surpluses into record deficits, but this budget shows that's exactly what's happened," said Senate Democratic Leader Tom Daschle of South Dakota.
Sen. Ted Kennedy, D-Mass, called on Congress to reject Mr. Bush's spending plan, charging it was the "most antifamily, anti-worker, anti-healthcare, anti-education budget in modern times."
Mr. Bush would boost military spending by 7 percent in 2005, but that does not include the money needed to keep troops in Iraq and Afghanistan. Officials said a supplemental request for these funds will be sent to Congress but not until after the November elections. Congress last year approved an $87.5 billion wartime supplemental for the current budget year.
Homeland security, another top priority would receive a 10 percent boost, including an 11 percent increase in FBI funding to support increased counterterrorism activities.
A firestorm of criticism erupted last week when it was revealed the administration had re-estimated the 10-year cost of the newly enacted Medicare prescription drug benefit program at $534 billion, far above the $400 billion figure Congress used in passing the measure two months ago.
The budget documents said the major reasons for the discrepancy were higher estimates for the number of participants in the program and new projections for health care price increases.
As previously announced, Mr. Bush's budget proposes an ambitious program to return Americans to the moon as early as 2015 and eventually send a mission to Mars. However, the budget only contains $1 billion in new money for the effort over the next five years with another $11 billion reallocated from current NASA programs. In 2005, Mr. Bush proposes increasing NASA's budget by 6 percent to $16.2 billion.
Other programs that would receive boosts in Mr. Bush's budget include his No Child Left Behind education program; job training programs, including one that links community colleges with employers' and an $18 million increase for the National Endowment for the Arts.
Mr. Bush's budget proposes to hold the spending increase for all of the government's discretionary programs — those other than entitlement programs such as Social Security and Medicare — to 3.9 percent in 2005. That average rise includes big boosts for the military and homeland security.
Scores of government programs outside those two areas will be restrained to an overall increase of just 0.5 percent, below the rise in inflation, and some agencies will suffer outright cuts.
The proposed military budget, which goes to Congress to decide its fate, rings in at $401.7 billion. According to figures from the nonprofit Center for Defense Information, that will make U.S. military spending greater than the combined total of the next 21 biggest spenders, including Russia, Britain, China and France.
Under the president's budget, missile defense efforts would receive almost $10.2 billion in the new budget. That is nearly a $1.2 billion increase over this year, according to budget books provided by the Pentagon.
The proposed budget also includes a 3.5 percent raise in base pay for military personnel.
The budget also includes money to purchase 11 V-22 Osprey tiltrotor aircraft, 8 for the Marine Corps and 3 for the Air Force. The program was plagued by deadly crashes during its development.
To battle the soaring deficits, Mr. Bush proposed squeezing scores of government programs and sought outright spending cuts in seven of 15 Cabinet-level agencies. The Agriculture Department and the Environmental Protection Agency were targeted for the biggest reductions.
The president declared that his spending blueprint, which will set off months of heated debate in Congress, "advances our three highest priorities" winning the war on terror, strengthening homeland defenses and boosting the economic recovery.
"Our nation remains at war," Mr. Bush declared in his budget message. "This nation has committed itself to the long war against terror. And we will see that war to its inevitable conclusion: the destruction of the terrorists."
The president's plan for the 2005 budget year, which begins next Oct. 1, proposes spending $2.4 trillion for all government activities, up 3.5 percent from the current year. Revenues will total $2.04 trillion, a sizable 13.2 percent increase that the administration forecasts will occur from growing tax receipts powered by a stronger economy.
The budget assumes economic growth of 4.4 percent this year and 3.6 in fiscal 2005. For all of 2003, the economy grew at a 3.1 percent rate.
The president projects the 2005 deficit will be $364 billion, down from a projected record high deficit in dollar terms of $521 billion this year. He pledged to cut that in half over the next five years.
The president's budget states that stronger economic growth and reductions in general government spending will produce steady improvements in the deficit, which the administration projects will fall to $237 billion in 2009.
However, Democrats immediately attacked the spending proposal for what they viewed as harmful reductions in various government programs and the president's insistence on making his 2001 and 2003 tax cuts permanent at a cost projected in the budget of more than $900 billion over 10 years.
"This administration pledged that its tax cuts and policy choices would not turn record surpluses into record deficits, but this budget shows that's exactly what's happened," said Senate Democratic Leader Tom Daschle of South Dakota.
Sen. Ted Kennedy, D-Mass, called on Congress to reject Mr. Bush's spending plan, charging it was the "most antifamily, anti-worker, anti-healthcare, anti-education budget in modern times."
Mr. Bush would boost military spending by 7 percent in 2005, but that does not include the money needed to keep troops in Iraq and Afghanistan. Officials said a supplemental request for these funds will be sent to Congress but not until after the November elections. Congress last year approved an $87.5 billion wartime supplemental for the current budget year.
Homeland security, another top priority would receive a 10 percent boost, including an 11 percent increase in FBI funding to support increased counterterrorism activities.
A firestorm of criticism erupted last week when it was revealed the administration had re-estimated the 10-year cost of the newly enacted Medicare prescription drug benefit program at $534 billion, far above the $400 billion figure Congress used in passing the measure two months ago.
The budget documents said the major reasons for the discrepancy were higher estimates for the number of participants in the program and new projections for health care price increases.
As previously announced, Mr. Bush's budget proposes an ambitious program to return Americans to the moon as early as 2015 and eventually send a mission to Mars. However, the budget only contains $1 billion in new money for the effort over the next five years with another $11 billion reallocated from current NASA programs. In 2005, Mr. Bush proposes increasing NASA's budget by 6 percent to $16.2 billion.
Other programs that would receive boosts in Mr. Bush's budget include his No Child Left Behind education program; job training programs, including one that links community colleges with employers' and an $18 million increase for the National Endowment for the Arts.
Mr. Bush's budget proposes to hold the spending increase for all of the government's discretionary programs — those other than entitlement programs such as Social Security and Medicare — to 3.9 percent in 2005. That average rise includes big boosts for the military and homeland security.
Scores of government programs outside those two areas will be restrained to an overall increase of just 0.5 percent, below the rise in inflation, and some agencies will suffer outright cuts.
The proposed military budget, which goes to Congress to decide its fate, rings in at $401.7 billion. According to figures from the nonprofit Center for Defense Information, that will make U.S. military spending greater than the combined total of the next 21 biggest spenders, including Russia, Britain, China and France.
Under the president's budget, missile defense efforts would receive almost $10.2 billion in the new budget. That is nearly a $1.2 billion increase over this year, according to budget books provided by the Pentagon.
The proposed budget also includes a 3.5 percent raise in base pay for military personnel.
The budget also includes money to purchase 11 V-22 Osprey tiltrotor aircraft, 8 for the Marine Corps and 3 for the Air Force. The program was plagued by deadly crashes during its development.
Bush's budget for 2005 seeks to rein in domestic costs
January 4th 2004 - Facing a record budget deficit, Bush administration officials say they have drafted an election-year budget that will rein in the growth of domestic spending without alienating politically influential constituencies.
They said the president's proposed budget for the 2005 fiscal year, which begins Oct. 1, would control the rising cost of housing vouchers for the poor, require some veterans to pay more for health care, slow the growth in spending on biomedical research and merge or eliminate some job training and employment programs. The moves are intended to trim the programs without damaging any essential services, the administration said.
Even with the improving economic outlook, administration officials said, the federal budget deficit in the current fiscal year is likely to exceed last year's deficit of $374 billion, the largest on record.
The Congressional Budget Office and the White House budget office have projected a deficit of more than $450 billion this year.
But Joshua B. Bolten, director of the White House Office of Management and Budget, has said the president's policies will cut the deficit in half within five years, through a combination of economic growth and fiscal restraint.
Mr. Bush's budget request, to be sent to Congress by Feb. 2, includes several tax cut proposals, including new incentives for individual saving and tax credits to help uninsured people buy health insurance. The Democratic candidates for president have accused Mr. Bush of doing little to halt the recent rapid increase in the number of uninsured.
Administration officials said the president's budget would call for an overall increase of about 3 percent in appropriations for so-called domestic discretionary spending, which excludes the Department of Homeland Security, the Defense Department and insurance benefits like Medicare and Medicaid.
As he completes work on his budget, Mr. Bush faces criticism from conservatives, who say he has presided over a big increase in federal spending, and liberals, who say his tax cuts have converted a large budget surplus to a deficit.
Total federal revenues have declined for three consecutive years, apparently the first time that has happened since the early 1920's. But in those years, from 2000 to 2003, total federal spending has increased slightly more than 20 percent, to $2.16 trillion last year.
Brian M. Riedl, an economist at the conservative Heritage Foundation, said: ''President Bush is not focusing on his fiscal conservative base right now. He's trying to position himself in between conservatives in Congress and the Democratic Party. It may be good politics, but it's bad policy, a lost opportunity to get runaway government spending under control.''
White House officials deny that they have acquiesced in a domestic spending spree. They insist, as do some liberal advocacy groups, that appropriations for domestic programs are not exploding.
Such spending, they say, will increase 3 percent in 2004, after increases of 5 percent in 2003, 6 percent in 2002 and 15 percent in 2001. Moreover, they say, increased corporate profits should lead to an increase in corporate tax payments, lifting revenues in the coming years.
Richard Kogan, a budget analyst at the Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group, said the increase in military and domestic security spending in the last two years dwarfed the increase in domestic discretionary programs, which did not quite keep pace with inflation.
''The increases for defense, international affairs and homeland security have been much greater -- and thus have played a much larger role in the return to deficits -- than the increases for domestic appropriations,'' Mr. Kogan said.
Housing officials said the administration was alarmed at increases in the cost of vouchers, which provide rental assistance to low-income families, and would take steps to prevent local housing agencies from issuing more vouchers than Congress had authorized. Congress has tentatively decided to provide $14.2 billion for renewal of vouchers this year, an increase of about 15 percent.
Federal officials said they would also require families seeking housing aid to help the government obtain more accurate information on their earnings. As a condition of receiving aid, families would have to consent to the disclosure of income data reported to a national directory of newly hired employees. The directory was created under a 1996 law to help enforce child-support obligations.
Administration officials said the president's budget would also slow the growth of spending at the National Institutes of Health, which doubled in the last five years, reaching $27.1 billion in 2003. Congress has tentatively agreed to provide $28 billion this year, slightly more than Mr. Bush requested, and administration officials said they would seek an increase of 3 percent or less for 2005.
Budget officials defended the proposal, saying they wanted to be sure the agency was properly managing a huge infusion of federal money.
Mr. Bush proposed last year to double co-payments on prescription drugs for many veterans, primarily those with higher incomes and no service-connected disabilities. The White House reaffirmed its support for that proposal in November.
In the last week, the Pentagon has been considering a new proposal to increase pharmacy co-payments for retirees with at least 20 years of military service. Under the proposal, the charge for a generic drug would rise to $10, from $3, while the charge for a brand-name medicine would rise to $20, from $9.
The Military Officers Association of America criticized this as ''a grossly insensitive and wrong-headed proposal.'' In e-mail messages to the White House, members of the association asked Mr. Bush, ''Why do your budget officials persist in trying to cut military benefits?''
Col. Steven P. Strobridge, director of government relations at the association, said he understood that the Pentagon was now inclined to study the issue for a year and renew the proposal, as part of a systematic effort to ''reduce military health care costs.''
Administration officials said they expected Mr. Bush to seek increases of $1 billion, or 10 percent, for the education of children with disabilities and $1 billion, or 8 percent, in Title I grants for schools with high concentrations of students from low-income families.
Budget officials said they were concerned that they did not have enough money for Pell grants to keep pace with a recent surge in low-income students seeking help with college costs. They said Mr. Bush would address that problem in some way, without seeking an increase in the maximum grant, now $4,050.
The budget also seeks money to train more nurses, to encourage sexual abstinence among teenagers and to recruit ''volunteers in homeland security,'' who can respond to emergencies, including terrorist attacks.
They said the president's proposed budget for the 2005 fiscal year, which begins Oct. 1, would control the rising cost of housing vouchers for the poor, require some veterans to pay more for health care, slow the growth in spending on biomedical research and merge or eliminate some job training and employment programs. The moves are intended to trim the programs without damaging any essential services, the administration said.
Even with the improving economic outlook, administration officials said, the federal budget deficit in the current fiscal year is likely to exceed last year's deficit of $374 billion, the largest on record.
The Congressional Budget Office and the White House budget office have projected a deficit of more than $450 billion this year.
But Joshua B. Bolten, director of the White House Office of Management and Budget, has said the president's policies will cut the deficit in half within five years, through a combination of economic growth and fiscal restraint.
Mr. Bush's budget request, to be sent to Congress by Feb. 2, includes several tax cut proposals, including new incentives for individual saving and tax credits to help uninsured people buy health insurance. The Democratic candidates for president have accused Mr. Bush of doing little to halt the recent rapid increase in the number of uninsured.
Administration officials said the president's budget would call for an overall increase of about 3 percent in appropriations for so-called domestic discretionary spending, which excludes the Department of Homeland Security, the Defense Department and insurance benefits like Medicare and Medicaid.
As he completes work on his budget, Mr. Bush faces criticism from conservatives, who say he has presided over a big increase in federal spending, and liberals, who say his tax cuts have converted a large budget surplus to a deficit.
Total federal revenues have declined for three consecutive years, apparently the first time that has happened since the early 1920's. But in those years, from 2000 to 2003, total federal spending has increased slightly more than 20 percent, to $2.16 trillion last year.
Brian M. Riedl, an economist at the conservative Heritage Foundation, said: ''President Bush is not focusing on his fiscal conservative base right now. He's trying to position himself in between conservatives in Congress and the Democratic Party. It may be good politics, but it's bad policy, a lost opportunity to get runaway government spending under control.''
White House officials deny that they have acquiesced in a domestic spending spree. They insist, as do some liberal advocacy groups, that appropriations for domestic programs are not exploding.
Such spending, they say, will increase 3 percent in 2004, after increases of 5 percent in 2003, 6 percent in 2002 and 15 percent in 2001. Moreover, they say, increased corporate profits should lead to an increase in corporate tax payments, lifting revenues in the coming years.
Richard Kogan, a budget analyst at the Center on Budget and Policy Priorities, a liberal-leaning research and advocacy group, said the increase in military and domestic security spending in the last two years dwarfed the increase in domestic discretionary programs, which did not quite keep pace with inflation.
''The increases for defense, international affairs and homeland security have been much greater -- and thus have played a much larger role in the return to deficits -- than the increases for domestic appropriations,'' Mr. Kogan said.
Housing officials said the administration was alarmed at increases in the cost of vouchers, which provide rental assistance to low-income families, and would take steps to prevent local housing agencies from issuing more vouchers than Congress had authorized. Congress has tentatively decided to provide $14.2 billion for renewal of vouchers this year, an increase of about 15 percent.
Federal officials said they would also require families seeking housing aid to help the government obtain more accurate information on their earnings. As a condition of receiving aid, families would have to consent to the disclosure of income data reported to a national directory of newly hired employees. The directory was created under a 1996 law to help enforce child-support obligations.
Administration officials said the president's budget would also slow the growth of spending at the National Institutes of Health, which doubled in the last five years, reaching $27.1 billion in 2003. Congress has tentatively agreed to provide $28 billion this year, slightly more than Mr. Bush requested, and administration officials said they would seek an increase of 3 percent or less for 2005.
Budget officials defended the proposal, saying they wanted to be sure the agency was properly managing a huge infusion of federal money.
Mr. Bush proposed last year to double co-payments on prescription drugs for many veterans, primarily those with higher incomes and no service-connected disabilities. The White House reaffirmed its support for that proposal in November.
In the last week, the Pentagon has been considering a new proposal to increase pharmacy co-payments for retirees with at least 20 years of military service. Under the proposal, the charge for a generic drug would rise to $10, from $3, while the charge for a brand-name medicine would rise to $20, from $9.
The Military Officers Association of America criticized this as ''a grossly insensitive and wrong-headed proposal.'' In e-mail messages to the White House, members of the association asked Mr. Bush, ''Why do your budget officials persist in trying to cut military benefits?''
Col. Steven P. Strobridge, director of government relations at the association, said he understood that the Pentagon was now inclined to study the issue for a year and renew the proposal, as part of a systematic effort to ''reduce military health care costs.''
Administration officials said they expected Mr. Bush to seek increases of $1 billion, or 10 percent, for the education of children with disabilities and $1 billion, or 8 percent, in Title I grants for schools with high concentrations of students from low-income families.
Budget officials said they were concerned that they did not have enough money for Pell grants to keep pace with a recent surge in low-income students seeking help with college costs. They said Mr. Bush would address that problem in some way, without seeking an increase in the maximum grant, now $4,050.
The budget also seeks money to train more nurses, to encourage sexual abstinence among teenagers and to recruit ''volunteers in homeland security,'' who can respond to emergencies, including terrorist attacks.
Bush Deficit Plan Draws Derision
December 17th 2003 - President Bush's goal of cutting in half a projected $500 billion federal deficit within five years is being dismissed as too timid by conservatives, unachievable by analysts and laughable by Democrats.
Mr. Bush will include the objective in the $2.3 trillion budget for 2005 he sends Congress in February, nine months away from the presidential and congressional elections. The goal is backed by many Republicans, but conservatives want a bolder move against the record deficits and big spending increases the administration has run up.
"It's a rather anemic goal, actually," said Stephen Moore, president of the conservative Club for Growth. "We should be talking about how to balance the budget."
Administration officials say their goal is a 2009 deficit that is half of this year's level, which White House budget chief Joshua Bolten has said he expects to hit $500 billion.
Achieving a $250 billion deficit in five years, however, could take hundreds of billions in savings, a difficult political task.
White House officials deny warnings circulating on Capitol Hill that they might define their goal as halving the 4.4 percent share of the U.S. economy that a $500 billion deficit would be next year to 2.2 percent in five years. That would make their target 2009 deficit about $320 billion, leaving their task $70 billion easier.
The deficit for the budget year that ended Sept. 30 was $374 billion, the highest ever in dollar terms. Administration officials say the more important measure is how the shortfall compares with the size of the economy, with last year's 3.5 percent share far below the 6 percent post-World War II peak of 1983.
White House officials say to achieve their goal, Mr. Bush will rely chiefly on two strategies. He will propose extending tax cuts that would otherwise expire, which they say will spur the economy, and limiting the growth of spending that Congress must approve each year, probably to 4 percent or less.
"We're working with Congress to hold the line on spending," Mr. Bush said Monday. "And we do have a plan to cut the deficit in half."
Democrats say that even if Mr. Bush achieves his objective, he would leave huge shortfalls because he has driven deficits so high. Mr. Bush took office when large surpluses were projected for the foreseeable future, a forecast since dashed by recession, the costs of fighting terrorism and wars, and tax cuts.
"It's like so much with this administration in respect to fiscal matters, it's all spin, all the time," said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.
A $250 billion deficit would be the fifth highest on record in dollar terms. A $320 billion shortfall would be the second worst.
Thanks to projections that the economy will continue to strengthen, deficits are expected to gradually improve after this year.
The nonpartisan Congressional Budget Office projected last August that after peaking at $480 billion this year, the gap would drop to $170 billion by 2009 — if no new tax cuts are enacted and spending grows only at the rate of inflation.
Those assumptions have already proved untrue. Congress since August has enacted a Medicare expansion creating prescription drug coverage and improvements in veterans' benefits projected to add a combined $53 billion to the deficit in 2009.
Other costly proposals in the works include Mr. Bush's plan to extend expiring tax cuts; a revision of the alternative minimum tax to prevent middle-income earners from paying it; and energy legislation that has already passed the House.
If, along with those items, spending controlled by Congress grows at the average 7.7 percent annual rate seen since 1998, the resulting 2009 deficit would be $666 billion, G. William Hoagland, budget aide to Senate Majority Leader Bill Frist, R-Tenn., warned senators in a recent memo.
That would mean $416 billion in budget savings — an enormous amount — would be needed to reduce that year's red ink to $250 billion.
If congressionally approved spending grows only at the rate of inflation, the 2009 deficit would be $432 billion, Hoagland wrote.
Lawmakers have shown little taste for such a small increase. If they did — and that would mean no unforeseen expenses like new wars it would still require $182 billion in 2009 savings.
Acknowledges House Budget Committee Chairman Jim Nussle, R-Iowa, who supports Mr. Bush's goal, "It's not an easy lift."
That's an understatement, say many budget analysts. They say that considering the added tax cuts and spending increases Congress is likely to enact, it would take politically unthinkable tax increases and cuts in popular programs to achieve the savings needed to halve the projected deficit.
"Given the current makeup of Congress and the incumbent in the White House," halving the red ink in half is "fanciful," said Robert Reischauer, former Congressional Budget Office director and president of the Urban Institute.
"It's not a plan, it's a set of wildly optimistic assumptions," said Robert Bixby, executive director of the bipartisan Concord Coalition, which lobbies for balanced budgets.
Mr. Bush will include the objective in the $2.3 trillion budget for 2005 he sends Congress in February, nine months away from the presidential and congressional elections. The goal is backed by many Republicans, but conservatives want a bolder move against the record deficits and big spending increases the administration has run up.
"It's a rather anemic goal, actually," said Stephen Moore, president of the conservative Club for Growth. "We should be talking about how to balance the budget."
Administration officials say their goal is a 2009 deficit that is half of this year's level, which White House budget chief Joshua Bolten has said he expects to hit $500 billion.
Achieving a $250 billion deficit in five years, however, could take hundreds of billions in savings, a difficult political task.
White House officials deny warnings circulating on Capitol Hill that they might define their goal as halving the 4.4 percent share of the U.S. economy that a $500 billion deficit would be next year to 2.2 percent in five years. That would make their target 2009 deficit about $320 billion, leaving their task $70 billion easier.
The deficit for the budget year that ended Sept. 30 was $374 billion, the highest ever in dollar terms. Administration officials say the more important measure is how the shortfall compares with the size of the economy, with last year's 3.5 percent share far below the 6 percent post-World War II peak of 1983.
White House officials say to achieve their goal, Mr. Bush will rely chiefly on two strategies. He will propose extending tax cuts that would otherwise expire, which they say will spur the economy, and limiting the growth of spending that Congress must approve each year, probably to 4 percent or less.
"We're working with Congress to hold the line on spending," Mr. Bush said Monday. "And we do have a plan to cut the deficit in half."
Democrats say that even if Mr. Bush achieves his objective, he would leave huge shortfalls because he has driven deficits so high. Mr. Bush took office when large surpluses were projected for the foreseeable future, a forecast since dashed by recession, the costs of fighting terrorism and wars, and tax cuts.
"It's like so much with this administration in respect to fiscal matters, it's all spin, all the time," said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.
A $250 billion deficit would be the fifth highest on record in dollar terms. A $320 billion shortfall would be the second worst.
Thanks to projections that the economy will continue to strengthen, deficits are expected to gradually improve after this year.
The nonpartisan Congressional Budget Office projected last August that after peaking at $480 billion this year, the gap would drop to $170 billion by 2009 — if no new tax cuts are enacted and spending grows only at the rate of inflation.
Those assumptions have already proved untrue. Congress since August has enacted a Medicare expansion creating prescription drug coverage and improvements in veterans' benefits projected to add a combined $53 billion to the deficit in 2009.
Other costly proposals in the works include Mr. Bush's plan to extend expiring tax cuts; a revision of the alternative minimum tax to prevent middle-income earners from paying it; and energy legislation that has already passed the House.
If, along with those items, spending controlled by Congress grows at the average 7.7 percent annual rate seen since 1998, the resulting 2009 deficit would be $666 billion, G. William Hoagland, budget aide to Senate Majority Leader Bill Frist, R-Tenn., warned senators in a recent memo.
That would mean $416 billion in budget savings — an enormous amount — would be needed to reduce that year's red ink to $250 billion.
If congressionally approved spending grows only at the rate of inflation, the 2009 deficit would be $432 billion, Hoagland wrote.
Lawmakers have shown little taste for such a small increase. If they did — and that would mean no unforeseen expenses like new wars it would still require $182 billion in 2009 savings.
Acknowledges House Budget Committee Chairman Jim Nussle, R-Iowa, who supports Mr. Bush's goal, "It's not an easy lift."
That's an understatement, say many budget analysts. They say that considering the added tax cuts and spending increases Congress is likely to enact, it would take politically unthinkable tax increases and cuts in popular programs to achieve the savings needed to halve the projected deficit.
"Given the current makeup of Congress and the incumbent in the White House," halving the red ink in half is "fanciful," said Robert Reischauer, former Congressional Budget Office director and president of the Urban Institute.
"It's not a plan, it's a set of wildly optimistic assumptions," said Robert Bixby, executive director of the bipartisan Concord Coalition, which lobbies for balanced budgets.
Aging population makes this deficit scarier
June 15th 2003 - Huge tax cuts, soaring spending and rising deficits. It's beginning to look a lot like the 1980s again — with one big difference.
When deficits started taking off 20 years ago, the retirement of the baby boom generation was just a distant worry. Now, as the nation faces years of red ink, including at least a $400 billion shortfall in 2003 alone, the graying population is a fast-approaching reality that will put unprecedented strains on Medicare, Social Security and the economy starting around 2010.
While recent advances in productivity are expected to help the nation cope with the bulge in retirees, the reduced workforce, possible slowing of immigration and huge new fiscal burdens mean that, unlike the 1990s, the nation could have a tougher time growing out of new budget problems, economists say.
At the same time, by locking in years of deficits, lawmakers and the White House are reducing national savings and putting upward pressure on interest rates. That could limit their flexibility to increase taxes, issue bonds or take other steps to reform the massive health and retirement programs — while forcing deeper benefit cuts.
Warning from Greenspan
Federal Reserve Chairman Alan Greenspan has warned of an "unstable system" of rising debt relative to the size of the economy without changes in budget and program policies.
"On the one hand, from an economic point of view we should be stimulating the economy," says Robert Pozen, former vice chairman of Fidelity Investments and a member of President Bush's 2001 Social Security Commission, referring to the need for deficit spending in light of current, sluggish growth.
But, he adds, building in deficits now increases pressures down the line. "It's a serious problem, and it's not just Social Security, it's Medicare," Pozen says.
Legislation to add a 10-year, $400 billion prescription drug benefit to Medicare, which the Senate could vote on this week, could make the problems far worse. The White House, which originally wanted any drug bill to include major changes to reduce costs and move Medicare closer to the private insurance market, has largely dropped those demands.
Thomas Saving, director of the Private Enterprise Research Center at Texas A&M and one of the public trustees overseeing Medicare and Social Security, estimates the drug plan could add nearly $3 trillion in costs over a 75-year forecasting window — based on the assumption Congress will extend the benefit.
Today, Social Security and Medicare payroll taxes are generating a trust fund of surpluses. But by 2008, the government will have to start pumping more money into Medicare. Even without a drug benefit, the health program alone is expected to consume 20% of all revenue by 2026.
"The pressure on the Treasury really begins when the surplus in these programs peaks, and that's going to happen in just a couple of years," Saving says. "At that point, the actual revenue coming into Treasury, net of what they have to use for Social Security and Medicare, will start to fall."
Deficits expected through 2011
Overall, the non-partisan Congressional Budget Office (CBO) forecasts a 2003 deficit of $400 billion, with private economists expecting a bigger shortfall next year. Excluding the Social Security surplus, the CBO, which projected a $5.6 trillion, 10-year surplus in 2001, expects deficits through 2011. That does not include the Medicare drug plan.
Demographic changes are already having an impact in other industrialized nations. Austrian and French workers have been striking in protest of planned cuts in government pension plans. Germany and other nations face similar pressures and forecasts of lower growth as their populations age.
The USA is in comparatively good shape. While there are graying pressures in some developing nations, like South Korea, the USA will have the slowest rising median age of any country for the next 50 years, says Paul Hewitt, director of the global aging initiative at the Center for Strategic and International Studies.
Still, he predicts, "The boomers leaving will create a giant sucking sound in the workforce," making it harder to maintain elevated productivity. Mexico, a major source of immigrants, is aging faster than the United States and may not supply as many workers. Expected slower growth in Europe could affect the USA.
"If it was just the pension crisis, we wouldn't have a crisis. ... The problem is all on the health care side, driven by our crazy system," Hewitt says.
The Fed predicts that in the next 30 years, the U.S. working-age population will increase about 0.5% a year, compared with 1% now. The percentage of the population over 65 will rise from less than 13% to about 20% by 2030.
Spending on Medicare, Social Security, Medicaid health care for the poor and interest on the federal debt, could zoom from 8% of the economy to 21% by 2075, according to the CBO.
The impact of deficits is political, as well. Two years ago, with a $5.6 trillion surplus, it seemed reasonable for politicians to claim they could finance major changes — a Medicare drug benefit or the hefty upfront costs of transforming Social Security into a system of private investment accounts.
While the surpluses were never sufficient for the job, lawmakers may be losing political cover and public trust in their ability to act as responsible stewards as the deficits steadily pile up.
A May poll by the Pew Research Center for the People and the Press asked a variety of questions about the economy and the latest, $350 billion tax cut. More than half thought it would mainly help the wealthy and increase the deficit, 44% said it would help the economy, while 42% said it would force spending cuts. About a fifth thought it was fair to all.
Greenspan, who in the early 1980s chaired a commission that recommended raising taxes and increasing the retirement age to solve a previous Social Security financing gap, has told Congress the earlier it acts, the better chance it has of minimizing economic and social dislocations.
"I must say, the silence is deafening," he recently told a congressional hearing.
Many economists, while heeding Greenspan's warnings, argue the deficits — including the $350 billion tax cut law signed by Bush last month — have been necessary, given the slack economy. With interest rates already at historic lows, they argue the Fed has limited room to act.
"When you have an economy that's underperforming and far away from potential, the opportunity that you miss every year by not being back to full employment, the cost is enormous," says Jim Glassman, chief economist at J.P. Morgan Chase. He predicted the recent tax cut could increase economic growth by 1/2 percentage point in the next two years,
Dimitri Papadimitriou, president of the Levy Economics Institute at Bard College, says the deficit should be as much as $600 billion to jolt the economy, though he would have preferred a payroll tax cut. "For the time being, I don't think one should worry about the deficits," Papadimitriou says.
Others say Congress and the White House have used short-term economic problems as an excuse for policies with long-term ramifications. The House last week passed $82 billion in 10-year tax cuts — on top of the $350 billion measure, Bush's 2001 $1.6 trillion tax cut plan and a 2002 stimulus bill.
"It builds up the pressure to cut benefits over the long run," says Art Benavie, economics professor at the University of North Carolina at Chapel Hill, who has written a book on deficits.
"You're going to have structural deficits down the road as far as we can see, long-term deficits in an economy that's eventually going to be around full employment, which crowds out private investment ... personally, it makes me nauseous," Benavie says.
When deficits started taking off 20 years ago, the retirement of the baby boom generation was just a distant worry. Now, as the nation faces years of red ink, including at least a $400 billion shortfall in 2003 alone, the graying population is a fast-approaching reality that will put unprecedented strains on Medicare, Social Security and the economy starting around 2010.
While recent advances in productivity are expected to help the nation cope with the bulge in retirees, the reduced workforce, possible slowing of immigration and huge new fiscal burdens mean that, unlike the 1990s, the nation could have a tougher time growing out of new budget problems, economists say.
At the same time, by locking in years of deficits, lawmakers and the White House are reducing national savings and putting upward pressure on interest rates. That could limit their flexibility to increase taxes, issue bonds or take other steps to reform the massive health and retirement programs — while forcing deeper benefit cuts.
Warning from Greenspan
Federal Reserve Chairman Alan Greenspan has warned of an "unstable system" of rising debt relative to the size of the economy without changes in budget and program policies.
"On the one hand, from an economic point of view we should be stimulating the economy," says Robert Pozen, former vice chairman of Fidelity Investments and a member of President Bush's 2001 Social Security Commission, referring to the need for deficit spending in light of current, sluggish growth.
But, he adds, building in deficits now increases pressures down the line. "It's a serious problem, and it's not just Social Security, it's Medicare," Pozen says.
Legislation to add a 10-year, $400 billion prescription drug benefit to Medicare, which the Senate could vote on this week, could make the problems far worse. The White House, which originally wanted any drug bill to include major changes to reduce costs and move Medicare closer to the private insurance market, has largely dropped those demands.
Thomas Saving, director of the Private Enterprise Research Center at Texas A&M and one of the public trustees overseeing Medicare and Social Security, estimates the drug plan could add nearly $3 trillion in costs over a 75-year forecasting window — based on the assumption Congress will extend the benefit.
Today, Social Security and Medicare payroll taxes are generating a trust fund of surpluses. But by 2008, the government will have to start pumping more money into Medicare. Even without a drug benefit, the health program alone is expected to consume 20% of all revenue by 2026.
"The pressure on the Treasury really begins when the surplus in these programs peaks, and that's going to happen in just a couple of years," Saving says. "At that point, the actual revenue coming into Treasury, net of what they have to use for Social Security and Medicare, will start to fall."
Deficits expected through 2011
Overall, the non-partisan Congressional Budget Office (CBO) forecasts a 2003 deficit of $400 billion, with private economists expecting a bigger shortfall next year. Excluding the Social Security surplus, the CBO, which projected a $5.6 trillion, 10-year surplus in 2001, expects deficits through 2011. That does not include the Medicare drug plan.
Demographic changes are already having an impact in other industrialized nations. Austrian and French workers have been striking in protest of planned cuts in government pension plans. Germany and other nations face similar pressures and forecasts of lower growth as their populations age.
The USA is in comparatively good shape. While there are graying pressures in some developing nations, like South Korea, the USA will have the slowest rising median age of any country for the next 50 years, says Paul Hewitt, director of the global aging initiative at the Center for Strategic and International Studies.
Still, he predicts, "The boomers leaving will create a giant sucking sound in the workforce," making it harder to maintain elevated productivity. Mexico, a major source of immigrants, is aging faster than the United States and may not supply as many workers. Expected slower growth in Europe could affect the USA.
"If it was just the pension crisis, we wouldn't have a crisis. ... The problem is all on the health care side, driven by our crazy system," Hewitt says.
The Fed predicts that in the next 30 years, the U.S. working-age population will increase about 0.5% a year, compared with 1% now. The percentage of the population over 65 will rise from less than 13% to about 20% by 2030.
Spending on Medicare, Social Security, Medicaid health care for the poor and interest on the federal debt, could zoom from 8% of the economy to 21% by 2075, according to the CBO.
The impact of deficits is political, as well. Two years ago, with a $5.6 trillion surplus, it seemed reasonable for politicians to claim they could finance major changes — a Medicare drug benefit or the hefty upfront costs of transforming Social Security into a system of private investment accounts.
While the surpluses were never sufficient for the job, lawmakers may be losing political cover and public trust in their ability to act as responsible stewards as the deficits steadily pile up.
A May poll by the Pew Research Center for the People and the Press asked a variety of questions about the economy and the latest, $350 billion tax cut. More than half thought it would mainly help the wealthy and increase the deficit, 44% said it would help the economy, while 42% said it would force spending cuts. About a fifth thought it was fair to all.
Greenspan, who in the early 1980s chaired a commission that recommended raising taxes and increasing the retirement age to solve a previous Social Security financing gap, has told Congress the earlier it acts, the better chance it has of minimizing economic and social dislocations.
"I must say, the silence is deafening," he recently told a congressional hearing.
Many economists, while heeding Greenspan's warnings, argue the deficits — including the $350 billion tax cut law signed by Bush last month — have been necessary, given the slack economy. With interest rates already at historic lows, they argue the Fed has limited room to act.
"When you have an economy that's underperforming and far away from potential, the opportunity that you miss every year by not being back to full employment, the cost is enormous," says Jim Glassman, chief economist at J.P. Morgan Chase. He predicted the recent tax cut could increase economic growth by 1/2 percentage point in the next two years,
Dimitri Papadimitriou, president of the Levy Economics Institute at Bard College, says the deficit should be as much as $600 billion to jolt the economy, though he would have preferred a payroll tax cut. "For the time being, I don't think one should worry about the deficits," Papadimitriou says.
Others say Congress and the White House have used short-term economic problems as an excuse for policies with long-term ramifications. The House last week passed $82 billion in 10-year tax cuts — on top of the $350 billion measure, Bush's 2001 $1.6 trillion tax cut plan and a 2002 stimulus bill.
"It builds up the pressure to cut benefits over the long run," says Art Benavie, economics professor at the University of North Carolina at Chapel Hill, who has written a book on deficits.
"You're going to have structural deficits down the road as far as we can see, long-term deficits in an economy that's eventually going to be around full employment, which crowds out private investment ... personally, it makes me nauseous," Benavie says.
G.O.P. Senators Oppose Size of Bush Tax Cut
March 14th 2003 - President Bush's proposal to spur the economy by cutting taxes $726 billion over the next decade was dealt a potentially serious setback today when two Republican senators said they would support no cut larger than $350 billion.
The Republicans, Olympia J. Snowe of Maine and George V. Voinovich of Ohio, joined two Democrats, Max Baucus of Montana and John B. Breaux of Louisiana, to send a letter to their parties' Senate leaders stating that they were committed to vote against any tax cut beyond $350 billion unless it was offset by tax increases elsewhere or specific spending decreases.
If the Republicans stick to the pledge, the Bush proposal probably cannot win Senate passage.
The Senate has 51 Republicans, 48 Democrats and 1 independent. One Democrat, Zell Miller of Georgia, supports Mr. Bush, but the other 47 and the independent, James M. Jeffords of Vermont, are believed to oppose the tax plan. One Republican, Lincoln D. Chafee of Rhode Island, has said he will not vote for a tax cut this year under any circumstance.
So if Ms. Snowe and Mr. Voinovich stand fast, at least 51 senators seem to be against Mr. Bush's proposal. Two other Republicans, John McCain of Arizona and Susan Collins of Maine, have also expressed strong reservations about the plan, but the pledge by Ms. Snowe and Mr. Voinovich seems to carry even more weight because it was written and signed. The two took the stand, they said in the letter, because of ''international uncertainties and debt and deficit projections.''
Senator Tom Daschle of South Dakota, the Democratic leader, proclaimed, ''The president's plan is now officially dead.''
But Claire Buchan, a White House spokeswoman, dismissed that notion.
''We saw the same thing in 2001,'' Ms. Buchan said. ''Just as in 2001, we are confident that the president's proposals to create jobs and growth will prevail.''
What Mr. Bush calls his growth plan has two main parts. The first would eliminate income taxes for individuals on most stock dividends. The other would put in place this year reductions in tax rates enacted in 2001 but not scheduled to go into effect until 2004 or 2006.
Tonight, the Senate Budget Committee voted along party lines to approve a budget that would accommodate the $726 billion in tax cuts and allow them to be considered in the Senate under a procedure that bars a filibuster.
The first test of Senate support for Mr. Bush's tax package could come next week when the budget reaches the floor. The plan, a budget resolution, does not carry the force of law, but it sets a framework for all tax and spending measures Congress will consider this year.
Mr. Voinovich said tonight that he might vote for the budget, but that if he did, he would make it clear he would vote against the tax-cut element if it came up in legislation.
The Senate budget would permit $800 billion in added tax cuts that the president wants over 10 years, including extension of the repeal of the federal estate tax. But these would be considered later and would not be protected against filibuster.
The budget President Bush sent Congress last month would require the government to run deficits for at least 10 years, the Congressional Budget Office has reported. The plan of the Senate Budget Committee shows a budget surplus in 2013.
The committee accomplished that through spending restraints from 2009 through 2013 that are much tougher than what the administration has contemplated.
Democrats on the committee offered amendments today to reduce the tax cuts and permit more spending, but all were defeated. One by Senator Kent Conrad of North Dakota would have blocked most legislation that would result in a higher deficit until Mr. Bush gave Congress a detailed estimate of the cost of a war with Iraq.
But the committee chairman, Senator Don Nickles of Oklahoma, asserted that no Congress had ever provided money for a war before it started and that it was impossible to estimate how much a war and its aftermath might cost.
The House Budget Committee approved its version of a budget at 1:30 this morning. The plan was revised after midnight so money would be available for Mr. Bush's proposal to set some prescription drug coverage under Medicare only if most of the money for it was found by cutting spending elsewhere in Medicare or other benefit programs.
The Republicans, Olympia J. Snowe of Maine and George V. Voinovich of Ohio, joined two Democrats, Max Baucus of Montana and John B. Breaux of Louisiana, to send a letter to their parties' Senate leaders stating that they were committed to vote against any tax cut beyond $350 billion unless it was offset by tax increases elsewhere or specific spending decreases.
If the Republicans stick to the pledge, the Bush proposal probably cannot win Senate passage.
The Senate has 51 Republicans, 48 Democrats and 1 independent. One Democrat, Zell Miller of Georgia, supports Mr. Bush, but the other 47 and the independent, James M. Jeffords of Vermont, are believed to oppose the tax plan. One Republican, Lincoln D. Chafee of Rhode Island, has said he will not vote for a tax cut this year under any circumstance.
So if Ms. Snowe and Mr. Voinovich stand fast, at least 51 senators seem to be against Mr. Bush's proposal. Two other Republicans, John McCain of Arizona and Susan Collins of Maine, have also expressed strong reservations about the plan, but the pledge by Ms. Snowe and Mr. Voinovich seems to carry even more weight because it was written and signed. The two took the stand, they said in the letter, because of ''international uncertainties and debt and deficit projections.''
Senator Tom Daschle of South Dakota, the Democratic leader, proclaimed, ''The president's plan is now officially dead.''
But Claire Buchan, a White House spokeswoman, dismissed that notion.
''We saw the same thing in 2001,'' Ms. Buchan said. ''Just as in 2001, we are confident that the president's proposals to create jobs and growth will prevail.''
What Mr. Bush calls his growth plan has two main parts. The first would eliminate income taxes for individuals on most stock dividends. The other would put in place this year reductions in tax rates enacted in 2001 but not scheduled to go into effect until 2004 or 2006.
Tonight, the Senate Budget Committee voted along party lines to approve a budget that would accommodate the $726 billion in tax cuts and allow them to be considered in the Senate under a procedure that bars a filibuster.
The first test of Senate support for Mr. Bush's tax package could come next week when the budget reaches the floor. The plan, a budget resolution, does not carry the force of law, but it sets a framework for all tax and spending measures Congress will consider this year.
Mr. Voinovich said tonight that he might vote for the budget, but that if he did, he would make it clear he would vote against the tax-cut element if it came up in legislation.
The Senate budget would permit $800 billion in added tax cuts that the president wants over 10 years, including extension of the repeal of the federal estate tax. But these would be considered later and would not be protected against filibuster.
The budget President Bush sent Congress last month would require the government to run deficits for at least 10 years, the Congressional Budget Office has reported. The plan of the Senate Budget Committee shows a budget surplus in 2013.
The committee accomplished that through spending restraints from 2009 through 2013 that are much tougher than what the administration has contemplated.
Democrats on the committee offered amendments today to reduce the tax cuts and permit more spending, but all were defeated. One by Senator Kent Conrad of North Dakota would have blocked most legislation that would result in a higher deficit until Mr. Bush gave Congress a detailed estimate of the cost of a war with Iraq.
But the committee chairman, Senator Don Nickles of Oklahoma, asserted that no Congress had ever provided money for a war before it started and that it was impossible to estimate how much a war and its aftermath might cost.
The House Budget Committee approved its version of a budget at 1:30 this morning. The plan was revised after midnight so money would be available for Mr. Bush's proposal to set some prescription drug coverage under Medicare only if most of the money for it was found by cutting spending elsewhere in Medicare or other benefit programs.
Government hits national debt ceiling
February 20th 2003 - Replaying a drama from last year, the government is once again bumping against the debt limit of $6.4 trillion and the Treasury Department has begun taking evasive actions to prevent an unprecedented default on the national debt.
Treasury Secretary John Snow informed leaders of Congress on Wednesday that the government would reach the borrowing limit on Thursday and he would begin pulling investments out of a $48 billion government pension fund to make room for normal public borrowing auctions.
In a reference to the looming possibility of a war with Iraq, Snow urged Congress to act without delay to raise the borrowing limit.
"I know that you share the president's and my commitment to maintaining the full faith and credit of the U.S. government, especially at this critical time," Snow said in his letter.
"Together we must continue working to enact an increase in the statutory debt limit as quickly as possible to avoid any negative repercussions at home or abroad," Snow said.
The drama was similar to one that unfolded last year as Congress finally raised the debt ceiling from $5.95 trillion to the current limit of $6.4 trillion on June 28, but only after months of debate and brinksmanship with then-Treasury Secretary Paul O'Neill having to resort to ever-more elaborate procedures to shift funds in order to clear room for necessary borrowing.
Republicans will push to approve the Bush administration's request for a higher debt limit, citing the need to protect the country's excellent credit rating. U.S. Treasury securities are considered the safest investment in the world because the government has always met its obligations.
But Democrats are certain to use that request as a chance to criticize President Bush's tax cut policies, which they contend have led to record budget deficits and the need for a higher debt limit.
Democrats and deficits
A group of conservative House Democrats promised to oppose any increase in the debt limit that was not coupled with a plan to deal with the rising deficits.
"Less than nine months after raising the federal debt ceiling by a whopping $450 billion, the Treasury Department is once again demanding a blank check from Congress," the Blue Dog Coalition said in a statement. "We will only do harm to our country, our economy and our citizens if the federal government continues to borrow and spend with no regard for the burden it places on taxpayers and generations to come."
Snow said the administration would begin making room for normal borrowing Thursday by not fully investing in the Government Securities Investment Fund, often called the G-fund. This fund, which totals $48 billion, is used by the government to credit earnings for federal employees' pensions.
Snow stressed in the letter that any investments taken out of the G-fund to make room for other government borrowing would be replaced with interest earnings once Congress passes a new debt ceiling. Congress currently is in a weeklong recess.
The government can take similar actions with other government funds and there is a possibility it could make it to April 15 when a flood of tax payments will bolster government coffers.
Last year, the administration sought an increase of $750 billion in the debt ceiling, hoping to avoid a second battle so soon in the new Congress. However, Democrats in the Senate successfully blocked that effort and the actual amount approved was a much smaller $450 billion.
This time, Brian Roseboro, Treasury's assistant secretary for financial management, said the administration is not asking for a specific amount, leaving that decision up to Congress.
In testimony last week, Federal Reserve Chairman Alan Greenspan said Congress should consider doing away with the debt limit, saying it "has never in my judgment been successful in doing what it is supposed to have been doing, namely constrain spending."
Roseboro said the administration agreed with that sentiment, citing a comment made by O'Neill last year when he called the debt ceiling "an abomination."
While the debate over the debt limit often grows intense, as a practical matter Congress would be very unlikely to allow government finances to reach a point where there would be the possibility of an actual default on any part of the national debt, given the effect that would have on the government's credit rating and future interest levels it would have to pay on its substantial debt.
The national debt subject to limit stood at $6.392 trillion as of Tuesday, just $8 billion shy of the $6.4 trillion limit.
Treasury Secretary John Snow informed leaders of Congress on Wednesday that the government would reach the borrowing limit on Thursday and he would begin pulling investments out of a $48 billion government pension fund to make room for normal public borrowing auctions.
In a reference to the looming possibility of a war with Iraq, Snow urged Congress to act without delay to raise the borrowing limit.
"I know that you share the president's and my commitment to maintaining the full faith and credit of the U.S. government, especially at this critical time," Snow said in his letter.
"Together we must continue working to enact an increase in the statutory debt limit as quickly as possible to avoid any negative repercussions at home or abroad," Snow said.
The drama was similar to one that unfolded last year as Congress finally raised the debt ceiling from $5.95 trillion to the current limit of $6.4 trillion on June 28, but only after months of debate and brinksmanship with then-Treasury Secretary Paul O'Neill having to resort to ever-more elaborate procedures to shift funds in order to clear room for necessary borrowing.
Republicans will push to approve the Bush administration's request for a higher debt limit, citing the need to protect the country's excellent credit rating. U.S. Treasury securities are considered the safest investment in the world because the government has always met its obligations.
But Democrats are certain to use that request as a chance to criticize President Bush's tax cut policies, which they contend have led to record budget deficits and the need for a higher debt limit.
Democrats and deficits
A group of conservative House Democrats promised to oppose any increase in the debt limit that was not coupled with a plan to deal with the rising deficits.
"Less than nine months after raising the federal debt ceiling by a whopping $450 billion, the Treasury Department is once again demanding a blank check from Congress," the Blue Dog Coalition said in a statement. "We will only do harm to our country, our economy and our citizens if the federal government continues to borrow and spend with no regard for the burden it places on taxpayers and generations to come."
Snow said the administration would begin making room for normal borrowing Thursday by not fully investing in the Government Securities Investment Fund, often called the G-fund. This fund, which totals $48 billion, is used by the government to credit earnings for federal employees' pensions.
Snow stressed in the letter that any investments taken out of the G-fund to make room for other government borrowing would be replaced with interest earnings once Congress passes a new debt ceiling. Congress currently is in a weeklong recess.
The government can take similar actions with other government funds and there is a possibility it could make it to April 15 when a flood of tax payments will bolster government coffers.
Last year, the administration sought an increase of $750 billion in the debt ceiling, hoping to avoid a second battle so soon in the new Congress. However, Democrats in the Senate successfully blocked that effort and the actual amount approved was a much smaller $450 billion.
This time, Brian Roseboro, Treasury's assistant secretary for financial management, said the administration is not asking for a specific amount, leaving that decision up to Congress.
In testimony last week, Federal Reserve Chairman Alan Greenspan said Congress should consider doing away with the debt limit, saying it "has never in my judgment been successful in doing what it is supposed to have been doing, namely constrain spending."
Roseboro said the administration agreed with that sentiment, citing a comment made by O'Neill last year when he called the debt ceiling "an abomination."
While the debate over the debt limit often grows intense, as a practical matter Congress would be very unlikely to allow government finances to reach a point where there would be the possibility of an actual default on any part of the national debt, given the effect that would have on the government's credit rating and future interest levels it would have to pay on its substantial debt.
The national debt subject to limit stood at $6.392 trillion as of Tuesday, just $8 billion shy of the $6.4 trillion limit.
Social Security funds needed to balance books
August 29th 2001 - This year's federal budget surplus has plunged to $153 billion because of the nation's economic doldrums and the Bush administration's tax cut, meaning the federal government will have to cover $9 billion of spending by dipping into Social Security, the nonpartisan Congressional Budget Office projected Tuesday.
The new estimate for the federal surplus is sharply lower -- off by 44 percent --- from the $275 billion figure the CBO was predicting just three months ago. The reduction means that President Bush and congressional lawmakers will be hard pressed to keep their pledge not to use Social Security funds for any other government spending, save for a planned, steady retirement of the government's outstanding debt.
The CBO projected Tuesday that, if current spending habits aren't changed, the Social Security surplus would be dipped into again in 2003, for $18 billion, and in 2004, for $3 billion. The congressional accounting office projects a return to overall budget surpluses large enough to spare the Social Security fund in later years.
For the 10-year period from 2002 to 2011, the CBO calculates the nation will have a total surplus of $3.4 trillion -- three-quarters of which would be made up of excess monies in the Social Security trust fund. That number, however, is $2.2 trillion less than was projected just last May, and the reason for most of that drop is the $1.35 trillion tax cut championed by President Bush.
The new numbers offer a dimmer view of the federal budget than that provided by the White House Office of Management and Budget last week. The Bush administration has pointed out that the overall surplus is the second largest in the nation's history, and argues it is just big enough this fiscal year -- which ends September 30 -- to barely avoid use of Social Security funds.
That is politically significant because both Bush and congressional lawmakers from both parties have pledged to avoid dipping into the retirement fund reserve. So, although the surplus remains large by historical standards, the pledge makes most of it off-limits, because it is made up of Social Security receipts.
In past years, before the recent spate of robust surpluses, the federal government routinely dipped into the Social Security surplus for additional spending money. But in recent years, in light of questions about the viability of the retirement program in the coming decades, both Democrats and Republicans vowed to leave the fund alone, and only use that money to pay off the national debt.
Social Security's future
Should the new CBO estimates be borne out, the $9 billion taken from the Social Security Trust Fund will not have an immediate effect on disbursement of benefit checks. Money will continue to flow to beneficiaries every month, and the program will continue to take in more than it pays out annually.
But, Social Security won't stay flush with the looming retirement of the nation's 76 million "baby boomers." In the course of the next decade, more people will be drawing benefit checks, and fewer will be paying into the system. Social Security is at risk of running a deficit.
Many lawmakers of both parties -- and interest groups representing sectors of the population that expect Social Security to be available to them later in this century -- are concerned that continued use of the Social Security surplus for other government spending will jeopardize their retirement security.
President Bush has suggested his campaign proposal to allow individuals to invest some of their Social Security payroll taxes in the stock market could allay some of these fears. He has convened his Commission to Strengthen Social Security to deliberate over suggestions for modernization.
Shrinking federal surplus estimates, meanwhile, have prompted fears that the United States will not be able to pay down its long-term debt in the same time period.
The new CBO numbers project it will now be 2010 before the debt can be retired. In May, that was expected to happen in 2006.
Dems blame tax cut
Democrats have been quick to use the new budget numbers as backing for a claim they have been making for months -- that the Bush tax cut is too costly, especially in tandem with the administration's proposals to increase spending for defense, education and other programs.
Sen. Kent Conrad, D-North Dakota, who is chairman of the Senate Budget Committee, cautioned that the CBO projections do not include Bush's proposed spending over the next decade on items such as defense and education.
"When you put those together, what you find is that the invasion of the trust funds is far more serious than has been reported so far, far more serious," Conrad said on Tuesday.
"This is their spending plan. This is their tax plan. They have created this problem," he said of Bush and Republicans in Congress. "They have an obligation to tell us -- for example, when the president asks for $18 billion more for defense next year -- how is he going to pay for it?"
But administration officials and congressional Republicans have defended their priorities and last week's OMB numbers, and say the president's plan will continue to protect the Social Security surplus. GOP lawmakers have said over the past few weeks, as news of the dwindling surplus surfaced, that the tax cut will help to stimulate the economy, and the biggest threat to the surplus is too much spending by Congress.
"The budget is tight, and that is exactly where we want it to be and where we need it to be," said Rep. Jim Nussle, the Iowa Republican who is the House Budget Committee chairman. Nussle noted that much of the surplus was used for tax relief, to put money back in the hands of the taxpayers. He said Congress should be able to garner savings by going after excessive government spending.
Nussle stressed the new numbers are only projections, which he noted are often wrong, as they were in May. "The books aren't closed," he said. "This is a weather report. You've got to wait for the weather to happen."
Rough road ahead
The debate over the dwindling surplus and the budget will likely be the main order of business when both the White House and Congress return from their far-flung vacation destinations next week.
At the top of Congress's 'to do' list in the coming weeks will be completion of the 13 yearly appropriations bills, which will determine how the nation's $2 trillion, fiscal 2002 budget will be spent. The new budget numbers are bound to be a critical factor in the budget battles over that new spending. Already, Democrats have questioned whether the nation can afford some of Bush's spending priorities, in particular the proposed boost for defense spending.
Part of the difference in the estimates between the CBO and the OMB is accounted for by differences in economic forecasts. Last week, OMB predicted the national economy would rebound at the end of this year -- or the beginning of the next -- and grow at a healthy clip of 3.6 percent next year.
The CBO is predicting that the nation will avoid falling into a recession, but its prediction for economic growth next year is considerably lower, just 2.6 percent.
The new estimate for the federal surplus is sharply lower -- off by 44 percent --- from the $275 billion figure the CBO was predicting just three months ago. The reduction means that President Bush and congressional lawmakers will be hard pressed to keep their pledge not to use Social Security funds for any other government spending, save for a planned, steady retirement of the government's outstanding debt.
The CBO projected Tuesday that, if current spending habits aren't changed, the Social Security surplus would be dipped into again in 2003, for $18 billion, and in 2004, for $3 billion. The congressional accounting office projects a return to overall budget surpluses large enough to spare the Social Security fund in later years.
For the 10-year period from 2002 to 2011, the CBO calculates the nation will have a total surplus of $3.4 trillion -- three-quarters of which would be made up of excess monies in the Social Security trust fund. That number, however, is $2.2 trillion less than was projected just last May, and the reason for most of that drop is the $1.35 trillion tax cut championed by President Bush.
The new numbers offer a dimmer view of the federal budget than that provided by the White House Office of Management and Budget last week. The Bush administration has pointed out that the overall surplus is the second largest in the nation's history, and argues it is just big enough this fiscal year -- which ends September 30 -- to barely avoid use of Social Security funds.
That is politically significant because both Bush and congressional lawmakers from both parties have pledged to avoid dipping into the retirement fund reserve. So, although the surplus remains large by historical standards, the pledge makes most of it off-limits, because it is made up of Social Security receipts.
In past years, before the recent spate of robust surpluses, the federal government routinely dipped into the Social Security surplus for additional spending money. But in recent years, in light of questions about the viability of the retirement program in the coming decades, both Democrats and Republicans vowed to leave the fund alone, and only use that money to pay off the national debt.
Social Security's future
Should the new CBO estimates be borne out, the $9 billion taken from the Social Security Trust Fund will not have an immediate effect on disbursement of benefit checks. Money will continue to flow to beneficiaries every month, and the program will continue to take in more than it pays out annually.
But, Social Security won't stay flush with the looming retirement of the nation's 76 million "baby boomers." In the course of the next decade, more people will be drawing benefit checks, and fewer will be paying into the system. Social Security is at risk of running a deficit.
Many lawmakers of both parties -- and interest groups representing sectors of the population that expect Social Security to be available to them later in this century -- are concerned that continued use of the Social Security surplus for other government spending will jeopardize their retirement security.
President Bush has suggested his campaign proposal to allow individuals to invest some of their Social Security payroll taxes in the stock market could allay some of these fears. He has convened his Commission to Strengthen Social Security to deliberate over suggestions for modernization.
Shrinking federal surplus estimates, meanwhile, have prompted fears that the United States will not be able to pay down its long-term debt in the same time period.
The new CBO numbers project it will now be 2010 before the debt can be retired. In May, that was expected to happen in 2006.
Dems blame tax cut
Democrats have been quick to use the new budget numbers as backing for a claim they have been making for months -- that the Bush tax cut is too costly, especially in tandem with the administration's proposals to increase spending for defense, education and other programs.
Sen. Kent Conrad, D-North Dakota, who is chairman of the Senate Budget Committee, cautioned that the CBO projections do not include Bush's proposed spending over the next decade on items such as defense and education.
"When you put those together, what you find is that the invasion of the trust funds is far more serious than has been reported so far, far more serious," Conrad said on Tuesday.
"This is their spending plan. This is their tax plan. They have created this problem," he said of Bush and Republicans in Congress. "They have an obligation to tell us -- for example, when the president asks for $18 billion more for defense next year -- how is he going to pay for it?"
But administration officials and congressional Republicans have defended their priorities and last week's OMB numbers, and say the president's plan will continue to protect the Social Security surplus. GOP lawmakers have said over the past few weeks, as news of the dwindling surplus surfaced, that the tax cut will help to stimulate the economy, and the biggest threat to the surplus is too much spending by Congress.
"The budget is tight, and that is exactly where we want it to be and where we need it to be," said Rep. Jim Nussle, the Iowa Republican who is the House Budget Committee chairman. Nussle noted that much of the surplus was used for tax relief, to put money back in the hands of the taxpayers. He said Congress should be able to garner savings by going after excessive government spending.
Nussle stressed the new numbers are only projections, which he noted are often wrong, as they were in May. "The books aren't closed," he said. "This is a weather report. You've got to wait for the weather to happen."
Rough road ahead
The debate over the dwindling surplus and the budget will likely be the main order of business when both the White House and Congress return from their far-flung vacation destinations next week.
At the top of Congress's 'to do' list in the coming weeks will be completion of the 13 yearly appropriations bills, which will determine how the nation's $2 trillion, fiscal 2002 budget will be spent. The new budget numbers are bound to be a critical factor in the budget battles over that new spending. Already, Democrats have questioned whether the nation can afford some of Bush's spending priorities, in particular the proposed boost for defense spending.
Part of the difference in the estimates between the CBO and the OMB is accounted for by differences in economic forecasts. Last week, OMB predicted the national economy would rebound at the end of this year -- or the beginning of the next -- and grow at a healthy clip of 3.6 percent next year.
The CBO is predicting that the nation will avoid falling into a recession, but its prediction for economic growth next year is considerably lower, just 2.6 percent.
Bush unveils budget
February 22nd 2001 - In his first presidential news conference, President Bush said Thursday he would resist "the Christmas tree effect" as he pushes a budget plan, saying he hoped business leaders and Congress would resist the temptation to add a multitude of projects to his proposal.
"I don't want people putting ornaments on my plan," the president said. Bush said he hoped business interests "will listen to me, and I hope they will help me."
"I will resist the temptation of folks to pile on their pet programs onto our tax cut," he added.
"We thought long and hard about the right number," he said of the $1.6 trillion tax cut proposal. "We think it's just right."
"I have a reasonable and balanced budget," Bush said. "It funds priorities, and my administration has no higher priority than education." He said the budget would "honor the commitments to America's senior citizens," including support for Medicare and Social Security.
"Our budget is fiscally responsible. If enacted, it will reduced the deficit by an unprecedented amount over the next four years."
Bush turns aside questions on Clinton pardon
The news conference was announced barely more than an hour before it began, and Bush chose to hold the session in the less formal White House Briefing Room, rather than the more traditional East Room.
The news conference came on a day when much of the news was focused on Bush's predecessor, former President Bill Clinton and the pardons issued shortly before he left the White House in January.
Bush tried to turn the attention to the budget he will submit to Congress next week.
"I think the press corps will ferret out any wrongdoing," Bush said, in one of several attempts to turn aside questions about the pardons.
"As far as this White House is concerned, it's time to go forward. I've got too much to do ... to be worrying about decisions that my predecessor made," Bush said. "To the extent that the Justice Department looks at this matter, it will be done in a non-political way."
President to discuss espionage with Russia leader
Other topics touched on by Bush included:
• The spying case of FBI agent Robert Philip Hanssen, accused of gathering information for the Russians. Bush expressed confidence in FBI Director Louis Freeh, and said he would wait for proposals on how to improve FBI security. Bush said he was "very concerned" about the espionage and would discuss it with Russian President Vladimir Putin.
"I intend to deal with Mr. Putin in a very straightforward way, to be up front with him on all matters," Bush said.
• A U.S. missile defense proposal. "I was pleased to see comments from the Russian leadership that talked about missile defense," Bush said. "Their words indicated that they recognize there are new threats in the post-Cold War era, threats that require theater-based anti-ballistic missile systems. I felt their words were encouraging."
• The Persian Gulf. Six days after U.S. and British planes struck targets in Iraq, Bush shrugged off a question about more than half of the bombs missing their targets. He said the air strikes had two missions -- sending a signal to Saddam Hussein and degrading his military abilities. Bush asserted that both were successful.
Bush said Secretary of State Colin Powell, about to visit the Middle East, planned to listen to allies and form a policy that would convey to Iraqi leader Saddam Hussein: "We won't tolerate you developing weapons of mass destruction and we expect you to leave your neighbors alone."
"The primary goal is to make it clear to Saddam that we expect him to be a peaceful neighbor in the region and we expect him not to develop weapons of mass destruction," Bush said.
• Bush's support of so-called faith-based institutions to provide government-funded social services. Asked whether such an arrangement violated the Constitution, Bush said, "I understand full well that some of the most compassionate missions of help and aid come out of faith-based programs and I strongly support the faith-based initiative we are proposing.
"I do not believe it violates the separation between church and state," he said.
President Clinton announces another record budget surplus
September 27th 2000 - President Clinton announced Wednesday that the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history and topping last year's record surplus of $122.7 billion.
"Eight years ago, our future was at risk," Clinton said Wednesday morning. "Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion."
Instead, the president explained, the $5.7 trillion national debt has been reduced by $360 billion in the last three years -- $223 billion this year alone.
This represents, Clinton said, "the largest one-year debt reduction in the history of the United States."
"Like our Olympic athletes in Sydney, the American people are breaking all kinds of records these days. This is the first year we've balanced the budget without using the Medicare trust fund since Medicare was created in 1965. I think we should follow Al Gore's advice and lock those trust funds away for the future," he said.
In June, the administration predicted the surplus would be $211 billion, and would increase by as much as $1 trillion over the next 10 years.
"The key to fiscal discipline is maintaining these results year after year. We need to put our priorities in order," Clinton said.
The president's news comes as lawmakers on Capitol Hill continue to wrestle with the fiscal year 2001 budget numbers. The new budget year begins October 1, and work has been completed on only two of the 13 annual spending bills, as the Republican-led Congress and the White House remain at odds over spending allocations.
"I am concerned, frankly, about the size and last-minute nature of this year's congressional spending spree, where they seem to be loading up the spending bills with special projects for special interests, but can't seem to find the time to raise the minimum wage, or pass a patients' bill of rights, or drug benefits for our seniors through Medicare, or tax cuts for long-term care, child care, or college education," Clinton said.
"These are the things that need to be done and I certainly hope they will be and still make the right investments and the right amount of tax cuts," Clinton said.
Rep. J.C. Watts, R-Oklahoma, chairman of the House Republican Conference, said the GOP wants 90 percent of the surplus used for the debt. In a CNN interview, he said the other 10 percent should be used to "take care of a lot of priorities we have, like prescription drugs, making sure that our education needs are met, making sure some of our national security needs are met, and doing that while at the same time protecting the Social Security surplus and the Medicare surplus."
That approach would be in lieu of tax cuts, which "we can't do this year because the president vetoed it," Watts said.
Clinton unveiled the new numbers in a statement at the White House before departing for fund-raising events in Dallas and Houston.
"This is part of our fiscal discipline to reduce the debt with the federal surplus," said one White House official who asked not to be identified. Reducing the debt, the official said, has "real effects for real Americans." It means lower interest rates for mortgages, car loans and college loans, and leads to an increase in investment and more jobs."
It is the third year in a row the federal government has taken in more than it spent, and has paid down the debt. The last time the U.S. government had a third consecutive year of national debt reduction was 1949, said the official.
The federal budget surplus for fiscal year 1999 was $122.7 billion, and $69.2 billion for fiscal year 1998. Those back-to-back surpluses, the first since 1957, allowed the Treasury to pay down $138 billion in national debt.
"Eight years ago, our future was at risk," Clinton said Wednesday morning. "Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion."
Instead, the president explained, the $5.7 trillion national debt has been reduced by $360 billion in the last three years -- $223 billion this year alone.
This represents, Clinton said, "the largest one-year debt reduction in the history of the United States."
"Like our Olympic athletes in Sydney, the American people are breaking all kinds of records these days. This is the first year we've balanced the budget without using the Medicare trust fund since Medicare was created in 1965. I think we should follow Al Gore's advice and lock those trust funds away for the future," he said.
In June, the administration predicted the surplus would be $211 billion, and would increase by as much as $1 trillion over the next 10 years.
"The key to fiscal discipline is maintaining these results year after year. We need to put our priorities in order," Clinton said.
The president's news comes as lawmakers on Capitol Hill continue to wrestle with the fiscal year 2001 budget numbers. The new budget year begins October 1, and work has been completed on only two of the 13 annual spending bills, as the Republican-led Congress and the White House remain at odds over spending allocations.
"I am concerned, frankly, about the size and last-minute nature of this year's congressional spending spree, where they seem to be loading up the spending bills with special projects for special interests, but can't seem to find the time to raise the minimum wage, or pass a patients' bill of rights, or drug benefits for our seniors through Medicare, or tax cuts for long-term care, child care, or college education," Clinton said.
"These are the things that need to be done and I certainly hope they will be and still make the right investments and the right amount of tax cuts," Clinton said.
Rep. J.C. Watts, R-Oklahoma, chairman of the House Republican Conference, said the GOP wants 90 percent of the surplus used for the debt. In a CNN interview, he said the other 10 percent should be used to "take care of a lot of priorities we have, like prescription drugs, making sure that our education needs are met, making sure some of our national security needs are met, and doing that while at the same time protecting the Social Security surplus and the Medicare surplus."
That approach would be in lieu of tax cuts, which "we can't do this year because the president vetoed it," Watts said.
Clinton unveiled the new numbers in a statement at the White House before departing for fund-raising events in Dallas and Houston.
"This is part of our fiscal discipline to reduce the debt with the federal surplus," said one White House official who asked not to be identified. Reducing the debt, the official said, has "real effects for real Americans." It means lower interest rates for mortgages, car loans and college loans, and leads to an increase in investment and more jobs."
It is the third year in a row the federal government has taken in more than it spent, and has paid down the debt. The last time the U.S. government had a third consecutive year of national debt reduction was 1949, said the official.
The federal budget surplus for fiscal year 1999 was $122.7 billion, and $69.2 billion for fiscal year 1998. Those back-to-back surpluses, the first since 1957, allowed the Treasury to pay down $138 billion in national debt.
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