- The Washington Times - Thursday, January 16, 2003

Federal budget director Mitchell E. Daniels Jr. told business leaders yesterday that no one should "hyperventilate" because the government has "returned to an era of deficits," but he warned of serious fiscal problems unless Medicare is reformed promptly.
Deficits may continue into the next decade, he said, as the country recovers from economic recession and wages war on terror.
"Balance in the nation's books is a high priority, but some things come ahead. These include national security and the economic strength of the country," Mr. Daniels told business executives at a conference hosted by the U.S. Chamber of Commerce.
At a time when interest rates are historically low with no prospect of meaningful increases in the forseeable future, yearly deficits of 2 percent to 3 percent of national economic output are not worrisome, the Bush administration's budget chief said.
"By any historical measure, these are manageable deficits," he said. "We have the lowest debt burden we have had in a long time. It wil be important to keep it there."
He said interest on the national debt now $6 trillion, of which $2.7 trillion is for Social Security benefit checks takes the first eight cents of each federal tax dollar, compared to 15 cents of each dollar during high-deficit years of the 1990s. "It's affordable," Mr. Daniels said.
However, he said, real danger looms for greater fiscal damage unless entitlement programs such as Medicare are reformed. Unfunded liabilities with an unreformed Medicare system would cause "more than three times current deficits" of a projected $200 billion to $300 billion a year in 2003 and 2004, he said.
Medicare reform, including a prescription drug benefit for seniors, is expected to be a major element of President Bush's State of the Union message to Congress on Jan. 28. "We must have a Medicare system that protects people against catastrophic illness, which today's system does not," Mr. Daniels said.
The White House budget director said Mr. Bush's fiscal year 2004 budget will propose "moderate spending growth" above the estimated $789 billion available for federal discretionary programs this year. But he declined to give an amount before the budget proposal goes to Capitol Hill.
Yesterday, Agriculture Secretary Ann Veneman said the administration would seek a record $4.77 billion for the popular Women, Infants and Children (WIC) supplemental nutrition program for pregnant women, new mothers, and their children up to age 5.
Mr. Bush's first two budgets have increased WIC funding $737 million, and his proposed additional increase would boost participation from an estimated 7.8 million Americans this year to about 8 million in fiscal 2004, which begins Oct. 1.
Mr. Daniels defended Mr. Bush's proposed $647 billion, 10-year tax cut to bolster economic growth, primarily aimed at ending taxation of dividend income for investors. "It's a matter of fairness, first and foremost. Money taxed once ought not be taxed again," he told the business audience.
Congressional Democrats have criticized the Bush plan and countered with their own plan that would dole out $300 rebate checks to the poor and extend unemployment benefits by 26 weeks to laid-off workers. The Bush plan would triple the current $25,000 small-business expense allowance to $75,000 while Democrats would boost the allowance to $50,000.
Senate Minority Leader Tom Daschle, South Dakota Democrat, yesterday termed the Bush plan a "Leave No Millionaire Behind Act" and a "so-called economic stimulus package." He also criticized the president for refusing to spend $2.5 billion added by Democrats to homeland security legislation following the September 11 terrorist attacks, including about $1.7 billion for direct "hometown support" to states and localities.
Mr. Daniels predicted fairly swift compromise and agreement between congressional Republicans and Democrats on both a $385 billion omnibus spending package for the remainder of fiscal year 2003, which would wrap together 11 of 13 annual spending bills that Congress failed yet to enact, and an economic stimulus package.

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