- The Washington Times - Tuesday, January 10, 2006

ASSOCIATED PRESS

President Bush’s new budget will call for sacrifices as a way to meet his goal of cutting the budget deficit in half by 2009, Treasury Secretary John W. Snow said yesterday.

Mr. Snow said every government agency would be asked to help reduce the growth of government spending in the budget proposal that Mr. Bush will submit to Congress in early February.

The spending blueprint for the budget year that begins Oct. 1 will contain “good, tight spending controls” that will “call for sacrifices, no doubt about it,” Mr. Snow said.

The budget is being written to accomplish Mr. Bush’s 2004 campaign goal of cutting the deficit in half by 2009, Mr. Snow said.

When the 2004 deficit was initially projected to be $521 billion, the administration pledged to cut it in half, meaning the 2009 deficit would have to be $260.5 billion or less. The administration also has said the deficit as a percentage of the total economy will be cut in half, an easier goal to meet because the economy grows every year.

The 2004 deficit did not hit the administration’s initial projection but did set a record in dollar terms of $413 billion. The deficit for 2005 declined to $319 billion, still the third largest on record.

Many economists are forecasting the deficit for this year will come in at more than $400 billion, reflecting increased spending to rebuild the hurricane-ravaged Gulf Coast.

The administration is emphasizing its deficit-cutting efforts in part to deflect criticism from Democrats that deficits have grown because of tax cuts Bush got through Congress during his first term.

That argument is expected to intensify in coming weeks as the administration seeks passage of legislation to raise the national debt limit. Mr. Snow has said the government’s borrowing needs probably will push the current limit of $8.184 trillion as early as mid-February.

Mr. Snow said his top priority this year is making sure Congress does not undo Mr. Bush’s tax cuts, either by passing tax increases or allowing the current tax cuts to expire.

He refused direct answers to questions about any resurrection of the administration’s top priority from last year: reform of the Social Security system.

Mr. Bush’s proposal to set up private accounts for younger workers went nowhere in Congress and isn’t expected to be addressed in 2006, a congressional election year.

Mr. Snow also:

• Expressed no concern about Chinese diversification of part of the nation’s vast foreign exchange holdings from U.S. Treasury bonds to the debt of other countries. He said the U.S. bond market and the stock market dwarfed the size of other markets and would continue to attract foreign investment.

• Said any decline in housing prices probably would be moderate and not severe enough to derail what he expects will be solid economic growth of about 3.5 percent this year.

• Said the administration would continue to work for passage of legislation to beef up regulation of mortgage giants Fannie Mae and Freddie Mac and would keep working to get pension reform through Congress.

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