- The Washington Times - Monday, February 26, 2001

ASSOCIATED PRESS

President Bush plans to reduce corporate "subsidies" to help pay for tax cuts, and higher education and health spending, his budget chief said yesterday.

As Mr. Bush prepares to outline his budget plan to Congress tomorrow, one likely target is the U.S. Export-Import Bank, said Mitch Daniels, director of the Office of Management and Budget. The bank guarantees loans to foreign companies in projects that use U.S. products and services.

Also targeted are federal programs that bring telephone service to rural areas, Mr. Daniels said on "Fox News Sunday."

"There will definitely be some restraint and even some, yes, cuts in terms of government's involvement and subsidy of corporations," he said, citing government assistance for research and investments.

The administration also is taking aim at programs it sees as duplicative, he said. "We have 50 programs for the homeless sprawling across eight departments of government," Mr. Daniels said on CNN's "Late Edition."

"Those are not particularly the ones I am looking at here, but we have to be careful with duplication of that kind," he said.

For days, Mr. Bush has outlined proposed spending increases for popular programs, including education, Medicare and health research.

At the same time, he is proposing a 10-year, $1.6 trillion tax cut. Mr. Daniels pledged Mr. Bush would "pay down all the [national] debt that is available to be paid down."

Sen. John Kerry, Massachusetts Democrat, said Mr. Bush's plan to proceed with his tax cut was his "first significant mistake."

"There's going to be an enormous battle" in Congress, Mr. Kerry said on NBC's "Meet the Press." He insisted Mr. Bush's budget would not allow both the tax cut and necessary government spending.

The White House has said little about where Mr. Bush would cut spending to finance his agenda.

Mr. Bush will propose holding next year's overall discretionary spending to 4 percent growth a bit more than inflation and less than the average 6 percent increases in each of the last three years of the Clinton administration.

To achieve that 4 percent average after boosting certain spending, Mr. Bush must trim elsewhere.

Mr. Daniels said Mr. Bush's budget would increase federal spending by more than $25 billion. But, he said, some departments' spending must be "slowed down this year in order to make room" for Mr. Bush's priorities.

"We started a program decades ago to bring telephones to rural America," he said. "It's still there, although everybody's got a telephone."

The federal government distributes more than $2 billion a year to make local phone service affordable for customers in rural and other high-cost areas.

The lion's share of that comes not from taxpayer money, but from assessments on consumers' bills. The government administers the programs.

The Export-Import Bank provided $12.6 billion in loans, guarantees and credit insurance to help boost overseas sales of U.S. goods in the last fiscal year. Asked whether it was among the programs to be cut, Mr. Daniels said, "That could be."

Several prominent business groups, pointing to last week's report of a record trade deficit, have protested the likely cuts to the bank. Word of the reductions began leaking several days ago.

By trimming the corporate "subsidies," the Republican president is showing he will stand up to a key benefactor. The move could help insulate him from Democratic charges that his tax plan is tilted to the rich.

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