- The Washington Times - Friday, July 27, 2001

White House budget director Mitchell E. Daniels Jr. said yesterday that House Minority Leader Richard A. Gephardt and other Democrats were spouting political "nonsense" by claiming that the budget surplus will be erased in six months, threatening Social Security and Medicare.
Mr. Daniels said that, while the non-Social Security part of the surplus in the general fund "will be smaller" than forecast, the government would end this fiscal year with a total surplus in the $160 billion range — the second-biggest budget surplus ever.
Mr. Daniels also responded to recent suggestions by Mr. Gephardt that he would raise taxes if the deficits reappeared and the Democrats returned to power in the House, saying that would be the worst possible policy in the midst of rising job losses and weak economic growth. "There should be no confusion that the president will not acquiesce in raising taxes, especially when the economy is struggling," said Mr. Daniels.
Mr. Gephardt, Missouri Democrat, told Democratic Party donors last weekend that he was "glad we did what was right in 1993" when President Clinton and the Democrats raised taxes, adding "and I'll do it again."
But in an interview, the president's chief budget adviser reserved his strongest language to respond to reports that Senate Democrats are plotting to delay action on the defense appropriation bill in an attempt to use it as leverage with the White House later this year to force higher domestic spending concessions from President Bush.
"The needs of national security and our young men and women in uniform should not be held hostage to other spending plans. It would be the height of irresponsibility. I believe at the end of the day the Democrats in the Senate will not choose to do so," he said.
As for the relentless charges by Democratic leaders that the surpluses are in danger of being wiped out by Mr. Bush's policies, "We are going to run the second-largest surplus in American history, that much is certain," he said. "It is nonsense to talk about the surpluses disappearing. It's a huge surplus, gigantic."
Mr. Daniels said that by stirring up fears that the budget surpluses were being eaten up by the tax cuts and raising concerns that Social Security and Medicare funds would have to be used for general fund purposes, Democratic leaders were playing "a very old and tired game."
"We have far more than enough money to meet each of those programs," he said.
"This year we will be looking forward to enormous, historically large surpluses. We're in a range now that this nation has never seen before," said Mr. Daniels.
Clearly losing patience with the drumbeat of Democratic criticism about declining surpluses, Mr. Daniels said that the purpose of the Bush tax cuts was to "produce near-term and long-term economic growth, without which we would have no surpluses."
"Aside from brandishing their green eyeshades, what strategy have they proposed? I think we ought to drop the accounting arguments and get to the real question of how do we restart growth in this country which essentially wound down in the last couple of quarters of the Clinton administration," he said.
Mr. Daniels conceded yesterday that a big part of the decline in the projected surplus "is the result of tax relief, for which a bipartisan majority in Congress voted."
"The shrinkage due to the economy is a significant factor but another major factor was a step that was taken on purpose and a very good purpose which was tax relief, both for fairness and for economic growth reasons," he said.
"The true shrinkage due to the economy would be more on the order of 15 percent to 20 percent" of the non-Social Security surplus projections, he said.
The Social Security surplus "will probably come down, too, in a weaker economy, though it will be a very small reduction," he said.
Mr. Daniels pointed out that despite all the talk about declining surpluses from the slowdown in the economy, federal revenues were still growing by more than 3 percent, "but not as fast as the 5.5 percent that had been originally forecast before the economic slowdown began last year."
"The federal government is taking in more" money. "Not every American family is so lucky," he said.
"Most of the shrinkage in the surplus is attributable to corporations not making money and therefore not paying as much in taxes," he said.
Yet, for all the time spent in Congress arguing over surplus estimates for the current fiscal year, which ends Sept. 30, Mr. Daniels said that "these are very, very small differences in a $2.2 trillion [a year] revenue stream."
The White House Office of Management and Budget (OMB), which Mr. Daniels heads, will release new updated budget forecasts next month, about the same time when the Congressional Budget Office (CBO) will release its revenue, spending and surplus estimates. Mr. Daniels said he expects OMB and CBO, which share their data, to be very close in their final figures.
He also said that the administration was making significant progress on Capitol Hill in its attempt to slow down the rate of discretionary spending increases, adding that he expected last year's 8 percent spending increase to be cut to around the 4 percent rate the administration proposed. He said the appropriations committees were "moving quickly and staying within those limits" in the aggregate.

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