- The Washington Times - Thursday, August 23, 2001

The federal budget surplus for fiscal 2001 will be $158 billion, slightly more than half the $284 billion the White House predicted in April, according to estimates released yesterday by the Bush administration.

About $70 billion of the $126 billion reduction stems from a tax cut passed by Congress and signed by President Bush, according to the Office of Management and Budget. An additional $9 billion went for extra defense spending and farm relief, and $46 billion was the result of revenue shortfalls from the weakening economy.

Both parties quickly claimed vindication yesterday for their stances on the budget and taxes, with Republicans saying tax cuts were needed to shore up the economy.

House Speaker J. Dennis Hastert, Illinois Republican, said the estimates show that the tax-refund checks being mailed out this summer by the IRS "could not be hitting the streets at a better time because putting more money in people's pockets serves as an immediate economic stimulus."

But Democrats were saying the numbers backed their charges of fiscal irresponsibility on the part of the Bush administration.

The president "claimed we could afford his massive tax cut, a major defense buildup, more money for education, while paying down the debt and protecting Social Security and Medicare. And he was wrong," said Senate Budget Committee Chairman Kent Conrad, North Dakota Democrat.

White House press secretary Ari Fleischer played down such statements yesterday, saying smaller surpluses were needed to enforce fiscal discipline on congressional Democrats.

"Whatever the surplus is, there are people in Washington who are going to try to spend it down to zero," he said in Crawford, Texas, where the president is in the midst of a monthlong working vacation. "When you look at what's left on the operating side of the budget, it's about $1 billion. That will prevent the politicians from busting the budget and spending more on more pork and on more wasteful spending."

House Majority Leader Dick Armey sounded a similar tone, saying in a statement, "Less surpluses in Washington means less money for the big-spending Democrats."

Democrats countered that all the requests for extra spending, including farm relief for fiscal 2001 and an increase in defense spending for fiscal 2001 and fiscal 2002, have come from the White House.

As part of the OMB report, a midsession review of the budget, the White House proposed spending an additional $196 billion on defense during the next decade. It also added an extra $37 billion to its proposal for a prescription drug benefit under Medicare, bringing the administration total for that proposal to $190 billion while Congress considers a $300 billion prescription drug plan.

The midsession review also proposes an additional $314 billion in tax cuts during the next decade, although several administration economic officials have ruled out additional tax cuts for at least the next year or two.

The new proposals would reduce the on-budget surplus to $575 billion during the next decade, according to the OMB. The estimates do not include the $156 billion in surpluses attributable to Social Security in 2001 or similarly large surplus figures in later years.

Mr. Fleischer said both parties in Congress have trouble controlling their urges to overspend but that Democrats are the bigger spendthrifts.

"The argument the Democrats are making is: We want a bigger surplus so we can spend it down so there's no surplus," he said. "You hear a lot of complaining by the Democrats in the Congress that the surplus has so-called dwindled, because they wanted to dwindle it through more spending. They're not happy there's not a bigger surplus for them to spend."

Particularly troubling, said Mr. Conrad and other Democrats, are the long-term projections, which show a 10-year surplus of $5.6 trillion dwindling to $3.8 billion.

This spring, the OMB estimated that if fiscal 2001 economic growth were 1.4 percent instead of the 2.4 percent then predicted, receipts over the decade would fall by $290 billion. The office now estimates that the economy will grow by 1.7 percent in 2001.

Although that slower rate of growth will lower revenue by $90 billion during the first two years, the OMB assumes the economic rebound from 2003 to 2005 will be stronger than previously expected. That quick "snap back" means that OMB estimates no further impact from this year's economic slowdown.

Rep. John M. Spratt Jr., South Carolina Democrat, said the growth assumed in those years as well as in 2002 is substantially higher than is being predicted in most blue chip estimates.

"I hope it happens," Mr. Spratt said of the more-optimistic estimate. "I just think we ought to be more prudent."

Other Democrats were less measured in their tone.

"I am reminded of a rose-colored glass several years ago during the Reagan administration," said Senate Appropriations Committee Chairman Robert C. Byrd of West Virginia.

Democrats noted that the administration revised a 65-year-old accounting method to save $5.3 billion in fiscal 2001 and cut the cost of corporate tax payments delayed under this spring's tax bill by about $5 billion.

"They are cooking the books," Mr. Conrad said.

Mr. Fleischer also vowed yesterday that the president will stop "the big spenders from getting their paws on a big surplus they'd otherwise spend."

• Bill Sammon reported from Crawford, Texas.

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