- The Washington Times - Friday, January 18, 2002

Budget Director Mitchell E. Daniels Jr. said yesterday that President Bush's fiscal 2003 budget will boost spending by nearly 8 percent, including up to $15 billion more for homeland defense, with sharp cuts elsewhere to keep the deficit below $100 billion.
Mr. Daniels also said Mr. Bush wants Congress to reconsider the tax-cutting economic recovery bill that passed the House late last year before Democrats blocked it in the Senate. But in a renewed bid to cut a deal with Senate Majority Leader Tom Daschle, Mr. Daniels said, "The president is open to working with Congress on its size and shape. If the details are changed, the president is willing to talk about that."
In an advance look into the budget proposals the president will submit to Congress in the first week in February, Mr. Daniels said overall discretionary spending increases will be higher than the administration would ordinarily want but are necessary because "this is a budget to win a two-front war."
The White House Office of Management and Budget chief, who is still putting the finishing touches on the president's budget, said the administration "will propose a somewhat higher growth rate in spending than the 7 percent increase we got last year."
"It's higher than we'd prefer, but considering the war we are in, the increases we call for are of the highest priority," he said.
Mr. Daniels said in an interview that the bulk of the spending increases will be used to prosecute the global war against terrorism and to further strengthen homeland security to defend America from future attacks.
"There is a bias in this budget toward defeating terrorism around the world and defending America's homeland," he said.
While he declined to say how much more the Pentagon's budget will be, he said Tom Ridge, the head of the White House Office of Homeland Security, will get all he asked for to beef up national defenses against terrorism and to respond to future attacks.
"We wrote into the budget all of the things that Governor Ridge felt were necessary. It will roughly double spending in this area, on the order of $10 billion to $15 billion in new money," Mr. Daniels said.
"The biggest area of spending increases will be to improve our ability to respond to terrorist attacks. That includes improving our public health response systems, responding to bioterrorism, airline safety and better law enforcement along our borders," he added.
But Mr. Daniels said the budgetary funding for many programs and agencies either will have to be frozen or cut back to make room for the additional spending for national security needs and overall federal discretionary spending increases in higher-priority programs.
"All discretionary spending by the government, outside of defense and spending to combat terrorism, totals over $350 billion. That's a lot of money, and there are plenty of places there to reduce spending when you separate the effective programs from the ineffective programs," he said.
"In a time of war and recession, other priorities will have to take second place. And that means it is more crucial than ever that we look carefully at each activity," he said. "We will pick and choose programs that need cutting."
But many other programs will see increases, he said. A key area, scientific research, including research for new anti-terrorism technologies, "will be substantially more."
"A big piece of that will be the completion of the doubling of the National Institutes of Health budget, even under these circumstances," he said.
Mr. Daniels said he expected the budget deficit for the current 2002 fiscal period to be about $100 billion, which he described as "modest by historical standards, representing 1 percent of the country's gross domestic product" that is now about $10 trillion a year.
"Most of the spending on the war, repair and recovery, first steps toward homeland defense, airline security, all those things, most of that spending is taking place in fiscal 2002 and that is feeding the deficit, too," he said.
He said he expected the deficit to be "somewhat smaller" under Mr. Bush's proposed 2003 budget if all the president's proposals are accepted and economic growth picks up, as the administration forecasts it will.
"I think for 2003, we are looking for progress back in the direction of a balance in the budget. And we have a fighting chance of a balanced budget in '04, but we need the economy to come back," Mr. Daniels said.
"The key to lower deficits is economic growth. We are very cautious in our growth estimates. Our numbers will be well within the mainstream of economic forecasts," he said.
Looking at the depth and length of the recession, which began in March, Mr. Daniels said he now "wishes the tax cuts had been more front-loaded." The bulk of the administration's 10-year, $1.35 trillion tax-cut package takes effect in the last half of this decade.
"It's the economy and the war that has changed our budget situation. This year's budget would have been in a deficit if there had never been a tax cut. The only difference would be that our economy would be in worse shape," he said.

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