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Budget politics

 

The Wall Street Journal puts Bush's new budget in the context of how, up until now, he has been able to spend on both guns and butter.  "Ingredient one: strong revenue growth driven by an economy distinguished by surging profits and rising incomes at the top, which are taxed more heavily than incomes at the bottom.  Ingredient two: tax cuts and spending increases, which arrived when the U.S. economy needed a boost.  Ingredient three, and perhaps the most significant: the willingness of foreigners to lend to the U.S., which finances the budget deficit without pushing up interest rates at a time when Americans don't save very much." 

The Chicago Tribune says that Bush, who has paid scant attention to deficit reduction, is sounding much more like a deficit hawk these days.  "Bush's problem, as well as that of future presidents, is that it is easier to sell giving than taking away.  So far, he has lowered taxes and raised military spending, and pushed through a Medicare prescription drug benefit for seniors." 

The AP previews the Bush budget and quotes an already resistant Senate Budget chair Kent Conrad (D).  "Critics contend that Bush is able to show declining deficits and a balance in 2012 by leaving out major expenses.  Bush does project the costs of extending his 2001 and 2003 tax cuts, which the Congressional Budget Office estimates will cost $2.3 trillion over 10 years.  He only includes a one-year fix for the alternative minimum tax, which was initially designed to make sure the wealthy paid their fair share of taxes but is ensnaring more middle class wage earners." 

"Republicans hope to make the tax cuts a central feature of this year's budget debate," the Washington Post reports.  "Both the White House and Democratic leaders have vowed to eliminate the federal deficit by 2012, but Democrats have signaled their intention to do it in part by targeting tax breaks for corporations and taxpayers earning more than $500,000 a year." 

USA Today lists how the White House has started reaching out more to Democratic lawmakers and notes the potentially key roles to be played by Treasury Secretary Hank Paulson and budget director (and former member) Rob Portman.  "Both Cabinet members want to make progress on what may be the toughest issue next to Iraq: making Medicare and Social Security whole for the long-term.  Without changes in benefits, taxes or both, the programs will be insolvent within decades." 

Hill Democrats believe the federal government "could collect as much as $100 billion more a year by whittling the tax gap - the unpaid taxes, mostly on unreported earnings, that the I.R.S. estimated was about $300 billion a year.  But the Treasury Department... says it cannot realistically recover one-tenth as much as Democrats suggest."  More: "Democrats badly want the money because they have adopted strict 'pay as you go' budgeting rules that require Congress to pay for any new programs or tax cuts with revenue from other areas."