- The Washington Times - Tuesday, February 7, 2006

Top administration officials yesterday said their 2007 budget proposal’s tight rein on spending coupled with extending tax cuts are essential for continued economic growth, while Democrats attacked the measures as misplaced priorities that will harm the middle class.

“This budget would continue the economic policies that have brought prosperity to America,” Treasury Secretary John W. Snow told the Senate Finance Committee, in what became a terse partisan disagreement over which tax cuts should take priority.

Mr. Bush’s $2.77 trillion 2007 budget proposal calls for $1.7 trillion in tax relief over 10 years, with a large portion dedicated to making permanent the reduced tax rate for capital gains and dividends income.

The president chose not to include a permanent fix for the Alternative Minimum Tax (AMT). He instead proposed extending a temporary AMT fix for one year — a choice that concerns Democrats and a few Republicans who say the investment income tax relief is geared to the rich.

“There are nearly $2 trillion in additional tax cuts, but most of it is geared to the very well-to-do … rather than the middle class that’s finding it harder and harder to make ends meet,” said Sen. Charles E. Schumer, New York Democrat.

Sen. Olympia J. Snowe, Maine Republican, said taking care of the investment relief instead of the AMT is like “putting the cart before the horse.”

Mr. Snow insisted the investment tax relief more broadly benefits average Americans and has been a big part of the economic recovery.

“The lower tax rates on dividends and capital gains are at the heart of this very strong recovery we’ve seen,” he said.

The 2007 budget proposal holds a tight rein on most domestic spending, proposes to cut or eliminate 141 programs and requests $36 billion in savings from Medicare over five years.

Finance Committee Chairman Charles E. Grassley, Iowa Republican, said critics of tax relief only want to raise taxes.

“The harshest [critics] are those who are least willing to look at the spending side of the ledger. That’s where the problem is,” he said.

Still, he said approving Mr. Bush’s proposed Medicare saving is “going to be more difficult than last year because of the fact that it’s an election year.”

Meanwhile, Joshua B. Bolten, director of the Office of Management and Budget, was similarly quizzed by Senate Budget Committee Democrats, who said the economic outlook is hardly as rosy as it’s made to seem.

Sen. Kent Conrad, North Dakota Democrat, said Mr. Bush’s budget proposal fails to include the full cost of his tax cuts, the war in Iraq or correcting the AMT.

“He’s not facing up to any of these costs,” Mr. Conrad said, complaining that the nation’s debt will have more than doubled by the end of Mr. Bush’s second term.

Mr. Bolten said the main problem is the massive, unsustainable growth of entitlement programs — and that the proposed reduction for Medicare is a “modest first step I hope we can agree on.”

Budget Committee Chairman Judd Gregg, New Hampshire Republican, praised such efforts. But Sen. Tom Harkin, Iowa Democrat, said he “can’t believe that there’s a will to cut $36 billion out of Medicare” — and that Republicans will push it during an election year.

This article is based in part on wire service reports.

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