WASHINGTON – Treasury Secretary Paul O'Neill said Thursday that the U.S. economy was in the early stages of a significant recovery that will soon bring a return to budget surpluses.
Speaking before the U.S. Chamber of Commerce, O'Neill said that with "significant recovery" in prospect there was no need to soften implementation of Bush administration tax cuts that were approved last year.
Some Democrats have blamed the $1.35-trillion tax cut program, designed to be phased in over several years, for helping drive the budget back into red ink and have said it should not be put fully into effect.
O'Neill said the recovering economy would bring a return to budget surpluses and suggested it won't take long for that to happen, though he did not specify how quickly it might occur.
"We don't think it's a good idea for the federal government to run deficits under good economic conditions and we're expecting that as our economy recovers we'll return to budget surpluses ... and we think it won't be too far into the future," he said.
O'Neill equated any failure to implement the planned tax cuts to an increase in taxes and said it would not be appropriate -- a message calibrated for his receptive audience of business leaders.
"We don't believe for a minute that we need to have a tax increase, for sure we don't need to have a tax increase at this point where our economy is in the fledgling stages of a significant recovery," he said.
O'Neill said the U.S. economy "hit the wall" following last year's Sept. 11 attacks against the World Trade Center and the Pentagon. It was after the attacks that a private sector panel declared the U.S. economy had tipped into recession in March.
But looking at the prospective recovery, the Treasury chief said he remained "a great optimist" and added, "I don't think we've seen even a glimpse of the economic potential that exists in this economic engine."
O'Neill said the Bush administration still hoped that Congress would agree to an economic stimulus program -- effectively continuing a White House drive to revive a bid that so far has been blocked in the Democrat-controlled Senate.
"We continue to think it would be useful for the Congress to enact an economic stimulus bill and we're hoping with the back-and-forth between the House and Senate, the Senate will finally agree to do something that for sure includes the extension of unemployment insurance benefits and hopefully will provide support for accelerated depreciation," O'Neill said.
He said that, with the economy having lost 1.4 million jobs last year as a result of recession, any package should include accelerated depreciation for businesses that make new investments since that would help create employment.