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Bush Blames Surplus Drop on Slowing Economy - 2001-08-25

President Bush says a drop in the U.S. budget surplus is due largely to a slow economy. Democratic leaders blame the president for wasting a record surplus.

President Bush used his weekly radio address to defend his administration's latest budget predictions, which show the federal surplus has fallen 44 percent since April. The president said that is a result of a slowdown in the U.S. economy, but still leaves plenty of money to cover government spending. "A new budget report, released this past week, shows that despite the economic slowdown that began in the third quarter of last year, the federal budget is strong, healthy and in balance," he said. "In fact, the 2002 budget surplus will be the second biggest surplus in American history."

It is the second biggest surplus because of savings this administration inherited from former President Clinton. When money set aside for Social Security retirement payments is taken out of the equation, the surplus is now about $1 billion.

In the Democratic response to the president's radio address, South Carolina Representative John Spratt said Mr. Bush is to blame. "The president still calls it the second largest surplus in history, but let's be frank. When the surplus in Social Security is backed out of the budget, as it should be, there is no surplus," he said. "The president next blames the disappearance of the surplus on excessive spending, but all of the extra spending since he came to office is spending that he either initiated or approved."

One of the biggest spending packages the president approved was a tax refund for American consumers that cost about $40 billion. Mr. Bush is proud of that refund, saying it has come at just the right to time to spark an economic turn-around.

The drop in the budget surplus has many Congressional Democrats reconsidering the future impact of the tax cut on government spending, particularly the president's requests for an $18 billion increase in Defense.

Mr. Bush warned Congressional leaders that he intends to have his increase in Defense spending, but will not allow them to significantly increase spending on some other programs that might further reduce the budget surplus. "The greatest threat to our budget outlook is the danger that Congress will be tempted this fall to break its earlier commitments by spending too much," he said. "The old way in Washington is to believe that the more you spend, the more you care. What mattered was the size of the line in the budget, not the effect of that line on real people's lives."

The president said he will improve people's lives, not by spending more money, but by spending money more wisely. He says American consumers are better able to spend their own money in the form of a tax rebate than politicians in Washington.

Democratic Representative Spratt said Congress is ready to work with the president to safeguard budget surpluses, without borrowing from Social Security. But he said Mr. Bush must first recognize that the drop in that surplus, so far, is largely a result of his own policies. "We are proud as Democrats of the role we played in moving the budget from record deficits to record surpluses," he said. "We don't want to see eight years of budget discipline washed down the drain. We are ready to work with the president to put the budget back on even keel. But the Bush administration needs to heed the lessons of these last eight months, and acknowledge that the surplus is gone, due largely to its own policies."

The Congressional Budget Office presents its budget outlook next week. That projection could be even less than the administration figure, as the Bush plan assumes an economic growth rate of 3.2 percent, which is higher than many economists predict.