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As deficits return, Bush calls for balancing the budget

4 min read

CRAWFORD, Texas (AP) – President Bush, weighing new tax cuts he said would stimulate the economy, pledged Saturday to bring the federal budget back into balance. “We cannot go down the path of soaring budget deficits,” Bush said.

The president used his weekly radio address to promote the no-deficits theme that emerged from the economic summit held last week near his ranch. That forum also yielded ideas for fresh tax cuts for small investors that could form the basis of a new White House economic plan.

“A common theme among many panelists was that we must leave every dollar we can in the hands of the people who have earned it,” Bush said.

At the same time, he insisted upon fiscal discipline, drawing parallels between economic conditions during the Vietnam conflict and those now surrounding his war on terrorism. In the 1960s, war spending was not balanced by cuts in the rest of government spending and, as a result, the 1970s saw deep unemployment, growing deficits and spiraling inflation, he said.

“We must remember the lessons of the past,” Bush said. “We cannot go down the path of soaring budget deficits. We must meet our defense and homeland security needs, and hold the line on other spending.”

He accused the Democrat-led Senate of “ignoring fiscal discipline” and all but threatened to veto its spending bills if senators persist in trying to increase funds for programs such as public housing and agricultural research by hundreds of millions of dollars more than Bush wants.

Bush’s focus on the resurrected deficit – projected at $165 billion in the budget year ending Sept. 30, after four years of surpluses under his predecessor, Bill Clinton – comes as the president and his economic and political teams wrangle with election-year ideas for reviving the economy.

White House advisers cautioned that any formal proposal is still weeks away but Lawrence Lindsey, the president’s top economic adviser, made clear that tax changes will be at the core of any package.

“We have a tax code that is far too complicated, that overtaxes savings, that overtaxes investment, and we need to make adjustments in that,” Lindsey said on CNN’s “Novak, Hunt and Shields.”

Bush has singled out four ideas under consideration: cutting taxes on dividends, cutting taxes on the profits from the sale of stock and other assets, increasing the amount of stock-market losses that individuals can deduct in one year, (currently $3,000), and speeding up increases in the amount people can contribute to their 401(k) retirement accounts.

“We need lower taxation of capital on all fronts,” Lindsey said.

Democrats saw a contradiction in Bush’s overlapping signals on the deficit and tax cuts, which, under a no-deficit rubric, would have to be offset by trillions of dollars in spending cuts.

Gene Sperling, who was director of Clinton’s National Economic Council, said Bush can’t have it both ways.

“His policies are responsible for one of the most remarkable deteriorations in fiscal discipline,” Sperling said. “For him, now, to casually call for trillions of dollars more in new or extended tax cuts and then lecture Democrats over a billion of spending here or there is laughable at best – cynical and hypocritical at worst.”

Bush last week canceled more than $5 billion approved by Congress for emergency spending on everything from homeland security to firefighters to AIDS prevention.

He cited the need to put America back on the path to a balanced budget, an argument he reiterated on Saturday.

“For the good of our economy, for the good of the people who pay taxes, my administration will spend what is truly needed, and not a dollar more,” Bush said in the radio broadcast.

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