OMB director defends budget on Capitol Hill
OMB Director Mitch Daniels Tuesday defended President Bush's fiscal 2004 budget before the House Budget Committee against attacks from Democrats and a few Republicans critical of the deficit forecasts and the call to enact $1.5 trillion of tax cuts during a time of recession and possible war.
Daniels tried to downplay a five-year deficit forecast of $1.08 trillion-or $2.14 trillion not counting Social Security surpluses-by saying it was both "manageable" and "unavoidable."
Trying to discredit Democratic assertions that the deficits are primarily the result of Bush's 2001 tax cut, Daniels said that even without that tax cut, the deficit still would be about $170 billion in fiscal 2003, compared with the actual estimate of $304 billion. He also asserted that the deficit, estimated to be 2.7 percent of GDP in 2004, would still be smaller historically than deficits in 12 of the past 20 years. "It is manageable, in fact highly so," said Daniels, noting that because of low interest rates, the cost of debt service this year will be almost half of what it was five years ago.
But Budget ranking member John Spratt, D-S.C., said the president's budget would create "structural rather than cyclical" deficits because of a call to enact even more tax cuts totaling about $1.5 trillion-a number that could grow if Congress, as expected, passes a fix for the alternative minimum tax, which was not accounted for in the Bush budget. Spratt also criticized Daniels for not proposing a way to bring the budget back into balance and pay down debt in the near term, given future entitlement costs resulting from the baby boomers' retirement. "Where's the solution?" Spratt asked.
Daniels admitted the baby boom retirement was "the real fiscal danger," but criticized Democrats for not proposing a budget-balancing plan of their own. "It's a legitimate debate, but let's have it," Daniels said. He also challenged Democrats, if they thought it would help the budget picture, to call for repealing so-called marriage penalty relief or other portions of the 2001 tax cut. "What are the proposals to repeal?" Daniels asked. "Bring them on."
But Daniels also received some tough questions from Republicans who are also uneasy about the president's budget. Sounding an alarm that the president's tax cut agenda may be difficult to push through the House, Rep. Gil Gutknecht, R-Minn., criticized Bush's calls for additional tax relief in light of the deficit situation and the possibility of war with Iraq.
"It's going to be difficult for me at least to justify to my constituents that we need additional tax relief" at this time, said Gutknecht.