Budget Bristling Begins

U.S. lawmakers on both sides of the aisle are looking for the Bush administration to justify massive tax cuts as well as a projected deep deficit in President Bush's $2.23 trillion budget proposal for 2004.

"This is a tough pill to swallow," Rep. Gil Gutknecht, R-Minn., said Tuesday, referring to the $307 billion projected deficit and the plan's call for 4 percent growth in overall spending, which he said was too high.

Gutknecht told Office of Management and Budget Director Mitch Daniels that with such a large deficit forecast, he doesn't know how to defend the president's push for $695 billion in tax cuts as well as making permanent the $1.35 trillion tax cut enacted in 2001 that is set to expire after 2010.

"It's very difficult for us to justify borrowing another $1 trillion or whatever the number is in order to say yes to all these national priorities," Gutknecht said during a House Budget Committee hearing. The president's budget forecasts a $1.08 trillion budget deficit for the next five years.

But Daniels, the chief architect of the president's plan, said that a tax cut will spur the idling economy and argued that the deficit is a manageable percentage of the nation's overall gross domestic product: $307 billion represents about 2.8 percent of the total $10.5 trillion GDP, and is a smaller percentage than previous deficit figures.

"In fact, given a sputtering economy, it reflects appropriate economic policy, as the president decided in advocating a bold economic plan," Daniels said.

Rep. John Spratt of South Carolina, top Democrat on the budget panel, said by driving up deficits, Bush was passing on huge federal debts to future generations.

"I don't see any effort here to develop a plan that will get us out of the hole that's being dug," Spratt told Daniels, adding, "Where's the solution?"

Bush's proposed budget includes a 4 percent overall increase in spending, but puts a major portion of it in Department of Defense and Homeland Security spending. Defense spending will get a 6 percent hike over last year for a total of $380 billion. That doesn't count the costs that a war against Iraq would incur.

The Department of Homeland Security will get $41 billion, twice what was spent two years ago on those agencies making up the new department.

The new budget provides $66.2 billion to Department of Health and Human Services, a 2.5 percent increase. Much of the additional cash will go toward bioterrorism preparations, improving health care access in rural and urban areas, and beginning the transition toward a Medicare prescription benefit for seniors. The president wants to set aside $400 billion over 10 years to achieve that goal.

The president's economic stimulus plan jumped by $25 billion from an initial $670 billion tax cut estimate unveiled in January after Treasury officials announced new estimates for the next 10 years showed stock dividend recipients would actually receive $385 billion in tax cuts rather than the original $360 billion estimated.

Not everyone was hesitant about the massive spending plan and exuberant push towards tax reductions. Some Republicans said that the president's attempt to limit spending and trigger economic growth was a sound proposal.

"What matters is that we don't lose control of spending," said budget panel Chairman Jim Nussle, R-Iowa. "We must not commit to strategies that win popular support today, only to balloon in costs that will be imposed on our own children."

On the Senate side, lawmakers planned to hear from Bush's chief economic adviser on Tuesday afternoon. With a two-vote majority in the Senate, Sen. Charles Grassley, R-Iowa, chairman of the Senate Finance Committee, said he will try to muster up enough votes to get the stock dividend tax cut passed.

Grassley said he was focused on finding "tax policies that can deliver the most immediate bang for the buck."

Sen. Olympia Snowe, R-Maine, said she is cautious about the tax cut plan.

"Deficits must be a temporary phenomenon, not a perpetual cycle. In this light, we must exercise prudence and caution, and balance the near term need for tax cuts to help stimulate the economy, and new spending to meet pressing priorities, against the long-term goal of maintaining fiscal responsibility and balancing the budget," Snowe said. 

The Associated Press contributed to this report.