Paulson: Growth Can Spur Balanced Budget

02/06/2007

WASHINGTON (AP) - President Bush's $2.9 trillion budget plan on Capitol Hill got a predictably cool reception from congressional Democrats Tuesday, while Bush's GOP allies said it's up to the new majority to come up with an alternative that balances the budget without raising taxes.

House Ways and Means Committee Chairman Charles Rangel, D-N.Y., said he saw Bush's budget - which appeals to anti-tax GOP conservatives while curbing Democratic priorities - as a missed opportunity for Bush to reach out to Democrats, who for the first time in Bush's presidency control both the House and Senate.

"The president has to be a party to this. He can create a climate that would allow us to move forward in a bipartisan way," Rangel said.

The $2.9 trillion Bush budget for the budget year that begins next Oct. 1 would provide a massive boost for the Defense Department, seek an additional $245 billion in spending on the wars in Iraq and Afghanistan for this year and 2008 and restrain spending across a wide swath of the rest of government.

The spending restraints allowed Bush to project gradually declining deficits, with the budget going into surplus in 2012, three years after he has left office.

His budget plan would make his first-term tax cuts permanent, at a cost over the next decade that the administration estimates at $1.6 trillion - which the Bush team says is key to maintaining economic growth.

"We are submitting a budget that includes a surplus in 2012, which is achievable if we keep our economy growing," Treasury Secretary Henry Paulson told the House Ways and Means Committee.

Democrats, however, charged that the president is able to produce a surplus only on paper by using overly optimistic assumptions about how much revenue the economy will generate over the next five years and by leaving out expensive items such as further war costs after 2009 or providing money beyond this year to fix the alternative minimum tax so that it doesn't hit millions of middle-income taxpayers.

House Budget Committee Chairman John Spratt Jr., D-S.C., said the Bush plan shortchanges domestic programs such as heating subsidies for the poor, education and the State Children's Health Insurance Program, which helps children of low-income working families that earn too much to qualify for Medicaid but not enough to afford private insurance.

Democrats said the plant doesn't provide enough money for the program to cover all of the children who are currently enrolled.

"I couldn't believe that the president could be so unthinking as to want to deny poor children health care," said Rep. Pete Stark, D-Calif.

For their part, congressional Republicans rallied around the Bush plan and challenged Democrats to pass an alternative that doesn't raise taxes.

Rep. Adam Putnam, R-Fla., called the budget "a defining issue for ... whether (Democrats) can govern."

Despite requisite calls among all parties to work together, many also expressed pessimism that they could.

"We hope we can find common ground, but we also find the differences between us are substantial," Spratt told White House budget director Rob Portman.

Paulson and Portman are on friendly terms with many lawmakers, including Democrats, but many Democrats harbor distrust toward Bush and Vice President Cheney, whom they see as less flexible.

Paulson and Portman both disputed contentions by Democrats that the budget achieves its projected $61 billion surplus in 2012 by adopting overly optimistic economic assumptions.

"While no one has a crystal ball, our economic assumptions are close to the consensus of professional forecasters," Paulson said.

Paulson has been given the task by President Bush to see if a consensus can be reached on overhauling the government's huge benefit programs such as Social Security and Medicare. He said he looked forward to sitting down with Democrats and Republicans to see if a bipartisan consensus can be obtained.

He said the reductions in the new budget in spending on Medicare and Medicaid would lay the foundation for more comprehensive reform of the benefit programs.

Portman told the House Budget Committee that while the administration's budget projects balance in the short term, shortfalls in Social Security and Medicare promise to swamp taxpayers in the long term.

"The progress we are making in getting our fiscal house in order short-term must not distract us from this long-term challenge," Portman said. He added that it was possible the government's improving revenue picture could reduce the deficit from the $244 billion projected by the White House for the current year.