- The Washington Times - Thursday, January 24, 2002

President Bush will send Congress a $2 trillion wartime budget for fiscal 2003 that sharply increases defense spending, with the help of an $80 billion deficit, but also suggests tax surpluses could return by 2004.
The president's budget estimates a $106 billion deficit this year, reflecting the nation's deep economic slump and the costly war in Afghanistan precipitated by the terrorist attacks, Budget Director Mitchell Daniels Jr. said yesterday. This year's triple-digit deficit forecast is in sharp contrast to last year when the government ended 2001 with a surplus of $127 billion.
Mr. Daniels said the White House Office of Management and Budget projects that next year's $80 billion deficit will be $26 billion smaller because of stronger economic growth.
He said the deficit will continue to shrink until it produces a surplus, very possibly in 2004 or by 2005 at the latest.
"We look forward to resuming debt reduction as early as 2004," Mr. Daniels said.
The administration's proposed budget, which Mr. Bush will submit to Congress on Feb. 4, forecasts a nearly $2.9 trillion surplus over the next 10 years, if no further tax cuts or spending policy changes are enacted.
The administration's budget estimates the economy will grow by 0.7 percent this year, but expand by a much stronger 3.8 percent in 2003.
Mr. Bush proposes to boost defense spending by $48 billion next year, pushing the nation's total military budget to $379 billion, up from $331 billion enacted for this fiscal year. Mr. Mitchell said a separate $10 billion "war reserve" fund is included in the $48 billion request.
The budget plan also will call for an additional $15 billion for homeland defense, including more money for the states to respond to any future terrorist threats, public health preparations, airline safety and increased security on our borders.
Democratic leaders escalated their charges yesterday that the administration's tax cuts have been the major reason for the disappearance of the surpluses, but Mr. Daniels said the recession and the huge costs of the war estimated at $1 billion a month were driving the expected deficits.
However, he added that the deficits will be temporary and relatively modest by historical standards.
"Here we are in a recession and with a war on top of that and the deficit is less than one percentage point of the nation's gross domestic product," he said.
Mr. Daniels said there would be substantial spending cuts throughout the rest of the budget to partially offset increased spending for defense and anti-terrorism programs, but he refused to specify where those cuts will come.
In an interview with The Washington Times last week, Mr. Daniels indicated there would be cuts in what spending critics call "corporate welfare," such as the Export-Import Bank loans, and a number of other agencies and programs.
He said yesterday that in making its budget cuts, the administration has applied a much tougher standard that judges programs as "effective, ineffective or something in between."
But Mr. Daniels said the administration preferred to keep the public's focus on priority areas where the administration intends to increase spending, including education, Medicare and Medicaid for the needy and low-income housing assistance.
"The president will recommend a prescription drug benefit" for needy elderly people, he said.

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