- The Washington Times - Thursday, March 1, 2001

President Bush yesterday formally released his $1.959 trillion budget proposal for fiscal 2002, a plan that will allow overall spending to increase slightly faster than inflation and provides for a 10-year, $1.6 trillion tax cut.
"This budget is based on very conservative and cautious assumptions," said Mitch Daniels, director of the Office of Management and Budget (OMB). "We have fully enough money left to give a refund to the American taxpayer."
The budget "offers more than a plan for funding the government for the next year; it offers a new vision for governing the nation for a new generation," Mr. Bush wrote in a message accompanying the proposal.
Democrats immediately attacked the plan as a fiscally irresponsible tax scheme.
"This is a tax cut masquerading as a budget," countered Sen. Kent Conrad, North Dakota Democrat.
House Minority Leader Richard A. Gephardt, Missouri Democrat, accused the president of "gambling our healthy economy, the future of Medicare and Social Security, and our children's education on budget predictions that are no more reliable than a weather forecast."
As have other incoming presidents, Mr. Bush chose to release a budget outline rather than a line-by-line proposal.
For example, the 202-page document includes no reference to the District of Columbia. A detailed budget, including plans for the District, is expected in April.
Eager to move quickly, Republicans plan to move the core of Mr. Bush's tax plan an across-the-board cut in income-tax rates through the House Ways and Means Committee today and through the full House next week.
Congress would handle the other Bush tax cuts separately.
As if pointing toward an intense fight, House Speaker J. Dennis Hastert, Illinois Republican, said Democrats who oppose the tax cut preferred "a recession if that means they will have a political advantage."
"We're not going to let that happen," he said.
The budget proposal for fiscal 2002, which begins Oct. 1, calls for $46 billion in extra spending for education, defense, medical research and other programs.
Under education, Mr. Bush would create a new literacy program, allow states greater flexibility in using federal funds while increasing testing requirements for students and teachers, and create a school voucher program.
Mr. Bush has promised a long-term increase in defense spending but assumes for his budget only a modest rise for start-up costs associated with a missile-defense system and for military pay and housing. Larger increases that many expect after the completion of a strategic review are not included in the budget.
Also, the budget document suggests that the Bush administration will seek a new round of base closings, saying the military has a 23 percent surplus of bases.
"It is clear that new rounds of base closures will be necessary to shape the military more efficiently," the document's defense summary said.
Mr. Bush's budget suggests an additional $156 billion during the next decade to provide a prescription drug benefit under Medicare to low- and moderate-income elderly Americans.
The budget otherwise would leave alone most of the $1 trillion spent annually on mandatory programs such as Social Security, Medicare and Medicaid. The budget also assumes that about $188 billion will be spent in 2002 on interest payments on the nation's $3.1 trillion in publicly held debt.
The plan proposes using about $2 trillion in budget surpluses over 10 years to pay off federal debt.
With $1.6 trillion in tax cuts, $420 billion in increased interest payments, and proposed spending increases, Mr. Bush's budget still would leave unallocated about $1.4 trillion of projected surpluses.
Treasury Secretary Paul O'Neill promised lawmakers at a Senate hearing yesterday that $600 billion of those funds would go to Social Security. Coupled with the $2 trillion in debt reduction, Mr. O'Neill said the plan honors Mr. Bush's vow to preserve the $2.6 trillion Social Security surplus.
The other unallocated $800 billion could be used for further debt reduction, tax cuts, defense spending increases or Medicare reform, Mr. O'Neill said.
Overall, from 2001 to 2002, Mr. Bush would cut spending or allow no increase in spending for such Cabinet-level departments and agencies as the departments of Commerce, Energy, Interior, Labor, Justice, and Health and Human Services.
Particularly troubling to members of both parties are proposed reductions to the Department of Agriculture and to the Federal Emergency Management Agency.
The cuts have prompted Democratic opposition and grumbling from some Republicans.
Mr. Conrad, the ranking Democrat on the Senate Budget Committee, yesterday said top aides to several Republican senators already had contacted him to complain about details in the budget.
Aware of the political pitfalls, White House administration officials avoided discussing program cuts during a public briefing yesterday morning and referred to them obliquely in print as "redirected resources."
Among the proposed savings were an assumption called unlikely by many lawmakers that about 6,400 home-district projects worth $16 billion approved last year would not be repeated.
Scheduled for cuts were President Clinton's school-construction program and efforts to spur rural telephone service, shipbuilders and corporate high-tech research. Mr. Bush also proposed raising $75 million with new user fees for hazardous-material shippers and owners of pipelines and railroads.
The plan proposes about $30 billion in tax cuts for 2002, growing to $1.6 trillion over the next decade.
"While a debate over the shape of [tax-cut] proposals may remain after this budget has been delivered, there really is no debate left over size," said Mr. Daniels of OMB. "There is not 'more than enough' room for the president's relief plan; there is 'vastly more than enough' room."
Democrats disagreed and will announce a $750 billion tax plan this morning.
Although Mr. Bush said in a joint address to Congress on Tuesday night that he wanted his tax cuts to take effect Jan. 1, 2001, his budget does not make that assumption.
Mr. O'Neill told reporters yesterday that if Congress does decide to make the tax cut retroactive it still will have to keep the plan's value at $1.6 trillion.
As for the economy, the White House's budget takes a more optimistic view than the Congressional Budget Office.
Despite its own warnings that the economy is faltering, the OMB assumes gross domestic product growth will be 2.4 percent in 2001, 3.3 percent in 2002 and 3.1 percent through most of the rest of the decade.
OMB also assumes that inflation will fall from 2.7 percent in 2001 to 2.5 percent through 2011 and that unemployment will stay around 4.6 percent during the same period.
Overall, OMB assumes higher long-term growth, lower short-term inflation and lower unemployment, but higher interest rates, than the CBO.

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