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Iraq War, Tax Cuts Increase US Budget Deficit

President Bush has submitted a U.S. government budget for the fiscal year beginning in October that totals $2.8 trillion. VOA's Barry Wood reports that mainly because of tax cuts and the war in Iraq, the budget will be in deficit by an amount approaching nearly four percent of U.S. output (gross domestic product)

Budget director Josh Bolton unveiled a spending plan that gives the defense department a seven percent increase, to help cover the cost of the war in Iraq.

"The President has committed to provide our fighting men and women what they need to prosecute this war correctly and as safely as they can."

Alice Rivlin, a former budget director now a scholar at Washington's Brookings Institution, worries that the war in Iraq is actually being paid for with borrowed money, since taxes are not going up with the budget. "This is the first time actually we have fought a war without paying for it. And worse than that, we're fighting a war and cutting taxes at the same time."

Those tax cuts -- which may have boosted economic growth -- did much to shift government finance from surplus to deficit.

Ms. Rivlin says she is worried. "I worry a lot about the deficit. In the near term, we can probably finance it. The United States is a large, important economy and people are willing to lend us money all around the world."

The biggest foreign purchasers of U.S. government debt are the central banks of China and Japan. They buy U.S. bonds, in part, to hold down the value of their currencies so that it is easier to export to the United States.

John Snow, the U.S. treasury secretary, says the Bush administration is determined to bring down the deficit. "This budget also is committed to fiscal discipline. It holds government spending below the level of inflation. In the non-security, non-homeland security area it reduces actual spending. And it's consistent with the president's commitment to cut the deficit in half by the time he leaves office."

Alice Rivlin doubts that the administration will make good on the president's promise. "I think that is very unlikely because spending will continue to escalate and the president is very opposed to any increases in taxes."

Not surprisingly, opposition lawmakers in Congress are particularly critical of President Bush's budget. Democratic Party Senator Kent Conrad of North Dakota. "This budget represents an absolute failure to face up to the country's fiscal condition."

Within his own party, President Bush's budget policies are increasingly being questioned. The Republicans traditionally championed a smaller role for government in the economy. Under President Bush government spending has significantly increased.