- The Washington Times - Thursday, January 24, 2002

President Bush soon will send Congress his proposed fiscal 2003 budget, a $2 trillion-plus spending blueprint that is focused heavily on the war against terrorism, homeland defense and economic recovery.

"In a time of war and recession, other spending priorities will have to take second place," White House Budget Director Mitch Daniels told me in an interview.

The budget's overarching emphasis on fighting the war and the recession sets the theme for Mr. Bush's presentation to Congress, which will make Democratic criticism of his budget politically difficult. Ordinarily, cutting domestic spending would be the red meat of any election campaign, but attacking a budget that is based on the nation's national security is another matter altogether.

"It's going to be very hard for the Democrats to blast this budget whose spending priorities are the war, homeland defense and rebuilding the economy. It puts them in a very uncomfortable place politically," said a top Republican budget strategist.

The budget will be officially released on Feb. 4, but Mr. Daniels gave me an advance peek into what it will contain:

• Homeland defense programs will get $15 billion more, doubling what we are now spending, a testament to the power Mr. Bush has given to Tom Ridge, the head of the White House Office of Homeland Security. Mr. Ridge gave Mr. Daniels a long list of budget demands and got what he wanted. "We wrote into the budget all of the things that Gov. Ridge felt were necessary," he told me.

The biggest increases will be much more money for the states as "first responders" to terrorist attacks, airline safety improvements, expanding public health resources to respond to bioterrorism, and more security along our borders.

• Defense spending will be substantially increased perhaps by $30 billion to enlarge the war against terrorism and develop better-equipped, rapid-response forces and intelligence resources to seek out, destroy or thwart terrorist threats at home and abroad.

• There will be budget cuts and/or spending freezes throughout the nondefense budget, focused largely on ineffective or low-priority programs, aimed at keeping the fiscal 2003 deficit below $100 billion.

We will have a deficit of about $100 billion in fiscal 2002, after four years of budget surpluses. But such deficits, representing about 1 percent of the nation's $10 trillion gross domestic product, are modest by historical comparisons. They are the result of the economy's sharp decline and wartime spending increases. When the economy is restored to full vigor, the surpluses will come back, possibly by 2004, Mr. Daniels says.

• Discretionary spending which includes all government spending outside of automatic entitlement programs like Social Security, federal pensions and interest on the debt will rise by as much as 9 percent. That would be up from the 7 percent rise in the current fiscal 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," Mr. Daniels said.

However, he said he has taken a sharp scalpel to other parts of the budget to keep the deficit from ballooning out of control.

Discretionary spending represents one-third of all government spending. Subtract all money that will be spent on the military, homeland defense and the war, and that leaves about $350 billion in all other annual appropriations.

"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," Mr. Daniels said. "And that means it is more crucial than ever that we look carefully at each activity. We will pick and choose programs that need cutting."

Still, Mr. Daniels knows there will be huge political pressures in an election year to raise spending for some major special interests whose votes could well decide who controls Congress next year. The White House does not want to alienate any of them, or give the Democrats an easy campaign issue, if it can help it.

Thus, the administration has already made clear it will support the pending agriculture bill, bulging with some $70 billion in spending increases over 10 years, rather than risk losing the farm vote in November. Mr. Daniels also hinted Mr. Bush will agree to some of the Democrats' demands for bigger unemployment benefits as part of a deal to get a stimulus bill past the Senate.

There will be other spending increases elsewhere in the budget that the administration will highlight: Aid to education will get a few billion more, including programs for minorities. The National Institutes of Health will see its research budget double between this year and the next. The Department of Health and Human Services' budget will see significant increases. There is also more money for Medicare and for prescription drug benefits for the elderly.

Meantime, it is critical for the administration to keep the $1.35 trillion tax cuts on course and on time over the ensuing years, and perhaps accelerate them in a stimulus bill.

That, too, is at the heart of this budget and the economy's future recovery. If the Democrats regain control of the House this fall and expand their hold on the Senate, you can kiss those tax cuts goodbye because a Democratic majority would repeal most of them.

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