- The Washington Times - Thursday, February 6, 2003

Just about everything in President Bush's $2.2 trillion fiscal year 2004 budget is big: his tax cuts, his entitlement reforms and, unfortunately, too many of his spending increases.
There are many bold and far-reaching reforms in Mr. Bush's pro-growth budget plan that have his supporters cheering: A tax-cut stimulus to boost investments, strengthen the economy and create jobs; bigger tax-free investment and retirement plans that would effectively abolish capital gains taxes; and a sweeping, decentralization plan to turn the budget-busting Medicaid program over to the states through block grants.
The Medicaid move would let governors be as innovative in cutting costs, as they were with welfare reform.
Mr. Bush also is proposing a massive $400 billion overhaul of Medicare, turning it into a more market-oriented health care system that offers more choices for the elderly at more competitive costs. "Its payroll taxes do not even come close to covering is costs" and the gap is widening, says the Office of Management and Budget (OMB).
If you include the previously enacted 2001 income tax cuts that Mr. Bush wants to implement this year, he is proposing tax reductions of at least $3 trillion over 10 years, possibly more over the long term. In a blaring headline Tuesday, The Washington Post called Mr. Bush's proposals "Reagan Revolution redux." It wasn't meant as a compliment.
That's because Mr. Bush's tax cuts are intended to do much more than just breathe new life into an economy that barely grew during the fourth quarter. They also represent long-term spending cuts that will deny lawmakers the revenue that they will surely spend if they can get their greedy hands on it.
Even the president's conservative critics who want deeper budget cuts acknowledge this important-yet-little-noted side of the spending equation. The tax cuts are, in effect, Mr. Bush's stealth initiative to curb future spending big time.
Yet we are also in a deadly conflict with a determined army of terrorists that calls for wartime expenditures to safeguard our homeland.
Under Mr. Bush's plan, the Defense Department budget would grow to $380 billion, up 4 percent. The Homeland Security Department would get $36 billion next year, a 7 percent-plus increase.
To help offset these increases, Budget Director Mitch Daniels has targeted dozens of agencies and programs for budget cuts to keep aggregate discretionary spending (that part of the budget Congress appropriates each year) at no more than 4 percent growth. The Justice Department's budget, for example, would remain flat at $23 billion, reflecting the Immigration and Naturalization Service's move to Homeland Security. The Environmental Protection Agency would not see a net increase, either.
Still, there are many spending increases in this budget that should have been turned down. The State Department and international affairs budgets would balloon by $3 billion, a 20 percent boost, fed in part by Mr. Bush's $15 billion offensive against AIDS in Africa and the Caribbean.
The Education Department's budget would increase 5.6 percent to $53 billion, including more Pell college grants for low-income students and additional funding for Mr. Bush's No Child Left Behind initiative to improve public education.
There are increases, in some cases very modest ones, for almost all the departments: 1.3 percent for Housing and Urban Development, one of the worst-run Cabinet departments, according to the OMB; 6 percent more for Energy; 7 percent for Health and Human Services; 1.9 percent for Agriculture; 5.2 percent for Commerce, including a hard-to-swallow $5.4 billion increase for the National Oceanic and Atmospheric Administration; and 7.7 percent more for Veterans Affairs, boosting its budget to $63.6 billion.
The result of all this new spending is an estimated $304 billion deficit in 2004, up from $158 billion.
There is a lot of political hypocrisy and mythology about the deficit and its effect on our economy. Democrats are screaming that deficits do terrible things to our economy, but there is no evidence they have any effect on the economy or interest rates.
Mr. Bush's tax cuts have not caused the deficits. More than two-thirds of the $1.3 trillion in cuts (the biggest cuts to come) have not been phased in yet. The deficits are the combined result of the sharp economic slowdown that began in 2000 and worsened when the stock market bubble burst, the September 11, 2001, terrorist attacks, and the corporate accounting scandals that undermined confidence in Wall Street.
Tax-cut critics ridicule the notion we can grow our way out of the deficits, but that is exactly one part of the solution. As the U.S. economy grows, tax revenues also will grow substantially, and even with modest spending curbs the deficits will disappear and debt repayment will resume.
No one wants deficits, but if we need them to fight terrorism and combat a recession, this is the best time to have them. Interest rates are low and money is cheap. Over the coming decade, the feds will take in more than $26 trillion in taxes, so we can afford a little borrowing.
Meantime, there is still more than $100 billion in low-priority, wasteful spending in Mr. Bush's budget that needs to be eliminated permanently.

Donald Lambro, chief political correspondent for The Washington Times, is a nationally syndicated columnist.

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