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Bush successor faces massive debt
Question of the Day
President Bush, who entered the White House to budget surpluses, will bequeath the largest-ever budget deficit to his successor, and the men vying for that honor struggled Monday to explain how they will dig out from the inherited red ink.
After three successive drops, the deficit is now projected to top $389 billion for fiscal 2008, which ends Sept. 30, and grow to $482 billion in 2009, the White House announced Monday - $69 billion higher than the record high set in 2004. The president's economic advisers blamed a slow economy and the $150 billion tax-rebates bill that Congress and the president approved earlier this year.
"We are not happy about the deficit," said White House budget director Jim Nussle. "It is slightly higher than the average of the last 40 years. We have a plan to address that deficit and bring it down, which I think is a responsible one."
Mr. Nussle said the deficit still can be tamed by 2012, the end of the next president's term, but independent budget watchdogs scoffed at that optimism and both top presidential candidates called the numbers a worrisome wake-up call that something needs to change.
Sen. John McCain, the presumptive Republican presidential nominee, said his record on spending cuts and calls for a one-year spending freeze put him in a good position to tackle the problem, and said his Democratic opponent, Sen. Barack Obama, has no plan.
"Senator Obama will not commit to balancing our budget, does not propose to control spending, and has only one answer to every challenge: raise taxes," Mr. McCain said. "It will not work to solve the budget mess. His taxes would not raise enough over the next decade to cover his spending proposals, let alone make a dent in the budget deficit."
Mr. Obama's economic policy director, Jason Furman, countered that Mr. McCain won't be able to break from the Bush deficits.
"Senator McCain is proposing to continue the same Bush economic policies that put our economy on this dangerous path and that will drive America even deeper into debt," he said.
The numbers will only sharpen the key economic questions facing both parties: whether to extend Mr. Bush's tax cuts, as Mr. McCain proposes, or allow some of them to expire, causing a tax increase for upper-income earners.
"What happened? I thought we could cut taxes, pay for the war and balance the budget," said Sen. Charles E. Schumer, New York Democrat and chairman of the Joint Economic Committee. "Today it has become even more clear that Democrats are the party of fiscal responsibility."
Monday's numbers shed more light on Mr. Bush's fiscal legacy.
He inherited four consecutive years of budget surpluses, including a record surplus of $236 billion in 2000, and President Clinton notched a total surplus of $63 billion for his eight years in office. Based on the latest estimates, the cumulative budget deficits during Mr. Bush's two terms will exceed $2.5 trillion. Over the same period, the national debt will have increased 80 percent, rising from $5.8 trillion to $10.4 trillion.
"We will be forever in your debt," quipped Rep. Rahm Emanuel, Illinois Democrat.
"If they gave out Olympic medals for fiscal irresponsibility, President Bush would take the gold, silver and bronze," said Senate Budget Committee Chairman Kent Conrad, North Dakota Democrat. "President Bush will be remembered as the most fiscally irresponsible president in our nation's history."
Mr. Obama said the country is facing an "economic emergency," and convened an hours-long meeting with economic advisers Monday, but Laura Tyson, former chairman of the National Economic Council, said the record deficit was not specifically mentioned.
"We actually didn't discuss the number that came out today," she told reporters, adding that participants instead talked about adding extra spending on roads and other infrastructure that, Democrats hope, will boost the sluggish economy. Mr. Obama has talked about proposing a $50 billion package if he wins office.
He also said government programs to rescue troubled mortgage lenders and to expand health care coverage would ease many of the problems of the slumping economy.
Mr. McCain's campaign, meanwhile, said his plans focus on small businesses and job creation and on bringing down energy costs, which the campaign said is adding to economic woes.
Harvard economics professor Martin Feldstein, former president of the National Bureau of Economic Research, said Mr. McCain's proposals for more energy through expanded drilling, and to encourage conservation of fuel, will have an immediate impact on prices.
Neither campaign has been specific about how to address exploding costs in entitlement programs such as Medicare and Social Security, though Mr. McCain this weekend opened the door to tax increases in order to get Democrats to the negotiating table on Social Security.
"There is nothing that's off the table," he told ABC.
That is a reversal of his categorical denial he made to National Review last year, when he was fighting for the Republican nomination, and said there was no circumstance under which he would allow tax increases, even if it was to get Democrats to come to the table on entitlements.
"No. None. None," he said. "Tax cuts, starting with Kennedy, as we all know, increase revenues. So what's the argument for increasing taxes? If you get the opposite effect out of tax cuts?"
Campaign spokesman Brian Rogers on Monday said Mr. McCain would prefer not to raise taxes, but confirmed he is open to what Democrats propose.
"The lesson of history is that too many specifics at this point polarize the debate," Mr. Rogers said. "As president, John McCain will call on Congress to develop a bipartisan solution to Social Security."
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