- The Washington Times - Friday, August 24, 2001

The shrinking budget surplus has raised the stakes in President Bush's first spending battle with Congress and has emerged as a defining issue for both parties in next year's congressional elections.
"It is going to be just a classic battle between Democrats in Congress and the president," said Stephen Hess, a congressional analyst at the Brookings Institution. "It means an even hotter autumn than was predicted."
The White House announced Wednesday that the federal surplus for fiscal 2001 had declined from the $284 billion projected in April to $158 billion because of tax cuts and a weak economy. Not counting Social Security revenue, the administration said, the surplus will be about $1 billion this year and next year.
Meanwhile yesterday, Mr. Bush himself used a press conference during a visit to Crawford Elementary School to rebut Democratic complaints that the federal budget surplus has been devastated by his tax cut and the slowing economy.
"We've inherited an economic slowdown," Mr. Bush said. "We responded with tax relief. Now, evidently there are some people in Washington, D.C., who are having second thoughts about tax relief.
"And so my question to them is: Do they want to raise taxes? Do they suggest that helping the economy grow — a good way to do so is to raise taxes? If that's the case, that's a brand new economic theory."
The reduced pool of extra money to spend has produced distinctly different reactions from the parties. Democrats say Republicans and the White House have mismanaged the surplus that is needed for social programs; Republicans say their goal all along was to limit new federal spending by returning the surplus to taxpayers.
Even as taxpayers are receiving refund checks this week, the chairman of the House Democrats' fund-raising committee said Mr. Bush "is leading his Republican troops directly into the jaws of defeat in 2002."
"This is now officially the 'Bush Economy' and voters will hold President Bush and the Republicans accountable for the fact that the record surpluses we enjoyed just a year ago are gone," said Rep. Nita M. Lowey, New York Democrat and head of the Democratic Congressional Campaign Committee.
But Pete Jeffries, spokesman for House Speaker J. Dennis Hastert, Illinois Republican, said Democrats "are quickly learning that their worst fear is indeed coming true — they have less of your money in the federal piggy bank to spend at their free will."
Steve Schmidt, spokesman for the National Republican Congressional Committee, said the revised surplus is still the second-largest in U.S. history and that Democrats are not gaining any political traction by attacking "a very popular tax cut."
"Democrats are extremely desperate to sink their teeth into an issue," Mr. Schmidt said. "They're an issueless and leaderless party."
The reduced surplus also will present Congress with some clear choices this fall as it decides whether to fund the administration's requested $18 billion increase for defense, or to add money to the education bill in a House-Senate conference committee. The parties also are hundreds of billions of dollars apart on proposals to add a prescription-drug benefit to Medicare.
In Crawford, Mr. Bush renewed his warning yesterday that Congress should not spend more money in this fall's appropriations process than it agreed to during the budget process earlier this year.
"It is going to be incumbent upon the Congress to make sure they don't overspend," he said. "I will use the veto to make sure that Congress stays within the budget."
Daniel Mitchell, a fellow at the conservative Heritage Foundation, said the good news is that both parties have a smaller pot of money to fight over.
"All that extra money is like having blood in the water with hungry sharks," Mr. Mitchell said yesterday at a forum on defense spending.
Mr. Mitchell said Democrats are sounding the alarm prematurely, considering that Congress under Democratic control routinely dipped into the Social Security surplus for other programs.
"So this Chicken Little, 'Sky is falling,' the-end-of-fiscal-good-times that we're getting from the media and from some people on Capitol Hill, it's just nonsensical," he said. "Compared to 10 years ago, compared to 20 years ago, for those who think that fiscal balance is the key to nirvana in terms of fiscal policy, we're in great shape."
A spokesman for the National Taxpayers Union said lawmakers who have pushed for higher spending, not those who enacted tax cuts, are more responsible for dwindling surplus numbers.
Eric Schlecht, the conservative group's director of congressional relations, noted that total federal spending in 1995 was $1.51 trillion, and in 2001 it will be about $1.86 trillion, an increase of 22 percent. The average annual inflation rate during that period was 2.5 percent, Mr. Schlecht said.
* Bill Sammon contributed to this report from Crawford, Texas.


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