By David Stout
WASHINGTON — President Bush's budget chief and Senate Democrats clashed in a more or less friendly way on Tuesday, as the administrator defended Mr. Bush's low-tax philosophy and Democrats said the president was saddling American children with debt they will still be paying when they are grandparents.
"The president believes that making these tax cuts permanent is important for the economy," the budget chief, Jim Nussle, said at a hearing of the Senate Budget Committee, one day after Mr. Bush proposed a $3.1 trillion budget for the fiscal year that begins Oct. 1.
The hearing, which featured exchanges that touched on class distinctions as well as differences between Republicans and Democrats, made it clear that the president's budget would not become a reality in its present form.
Mr. Nussle asserted that changing the "temporary" tax cuts, which were passed early in the decade by a Republican-controlled Congress, into permanent ones would promote economic growth and prevent millions of hard-working Americans from getting hit with tax increases.
Mr. Nussle, whose formal title is director of the Office of Management and Budget, seemed to be in line for a hostile reception, given that the president's budget would increase the yearly deficit and add to the growing mountain of overall debt.
"We've seen this script before," Senator Kent Conrad, the North Dakota Democrat who heads the Budget Committee, said. "And it is a script and a play that leads us to, I think, an unfortunate ending — more deficit spending, greater debts and, unfortunately, a fiscal circumstance that will leave the next president inheriting what I believe will be a fiscal meltdown."
"I think you have a pretty difficult task of defending what I see as the indefensible, but take a shot at it," Mr. Conrad said, to laughter.
"Thank you for your hospitality," Mr. Nussle replied, saying he had fond memories of playing Mr. Conrad's role and being able to grill witnesses. Mr. Nussle used to be a Republican congressman from Iowa and headed the House Budget Committee, which assured him a friendly reception even as the proposed budget that he was arguing for was being ripped by Democrats.
Mr. Conrad argued that too much attention was being paid to the year-by-year deficit and not enough to the overall debt. "I never hear the word ‘debt' leave the president's lips — never," Mr. Conrad said. Depending on definitions, that debt is expected to exceed $10 trillion in the next couple of years.
"And this is the sweet spot of the budget cycle," Mr. Conrad said. "This is before the baby boomers retire. What is going to happen when you put on top of this legacy of debt the retirement of the baby boomers?"
Senator Jim Bunning, Republican of Kentucky, noted that the proposed budget is the rough equivalent of $10,000 for every man, woman and child in the United States. "I applaud the administration for tackling the issues of proposing to curb the unsustained growth in Medicare, Medicaid and Social Security spending," the senator said.
Mr. Bunning said the temporary tax cuts should be made permanent because, if they are not, many taxpayers in the $100,000-to-$200,000 income bracket, who once would have been considered rich but now belong to the middle class, "face the more immediate threat of the alternative minimum tax in the current year and the prospect of the largest tax increase in history when the 2001 and 2003 tax rate reductions expire."
While the president's budget would mean a hefty increase for Pentagon spending and other national security items — even without fully providing money for the war in Iraq — it would slow the growth of various entitlement programs and would trim or eliminate dozens of other domestic programs.
Mr. Nussle insisted that the spurt in the budget deficit, to some $410 billion this fiscal year and next from $162 billion in the last fiscal year, could be tied largely to the anticipated impact of the economic-stimulus package of individual tax rebates and business tax breaks being debated in Congress.
Mr. Nussle insisted that the budget could be balanced by 2012, as the president said. "First of all, continued economic growth is really the most critical element in reducing the deficit, getting back to balance and addressing our long-term challenges," he said.
Some Democrats said it was unrealistic for the president to call for $70 billion for the Iraq war in fiscal 2009 and nothing for the following year, given that the war is expected to consume some $200 billion in the current fiscal year. (Some lawmakers in both parties have complained about the Bush administration's requests for supplemental funds outside the regular budget for Iraq operations.)
Senator Bernard Sanders of Vermont, an independent who is one of the Senate's most liberal members, said the proposed budget would further a disturbing trend. "The United States has, by far, the most unequal distribution of income and wealth of any major country on earth," he said. "And increasingly, we're looking more like Brazil and Mexico than we are like Europe and Scandinavia and other industrialized countries." The issue, Mr. Sanders said, amounts to "a moral question."
"I have given some thought to tax distribution and tax reform," Mr. Nussle said. "And I would agree with you that our tax code needs to be reformed. And there are problems within our tax code that need to be rooted out." But he said that the top 1 percent of income-earners under the tax code now pay 40 percent of the country's taxes.
The exchange between Mr. Nussle and Mr. Sanders showed how numbers can be used, or at least viewed from different perspectives. So did Mr. Conrad's allusions to the country's overall debt. The ballpark figure of $10 trillion is correct if one includes i.o.u.'s from one government agency to another, like the Treasury securities held by the Social Security Trust Fund.
But if one defines debt as what the government owes to people and institutions who have lent it money, the projected figure for the next fiscal year is only $5.9 trillion.
By David Stout
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