Accessibility links

Breaking News

Debate Heats Up on US Budget, Tax Cut

President Bush is defending his budget and tax cut priorities, as Democrats step up attacks on his fiscal policies. Indications of a significant decline in the budget surplus are fueling the debate.

The debate is getting ugly.

New White House figures are about to be released that are expected to show a significant drop in the federal budget surplus. And everyone is pointing blame.

The surplus is shrinking because the economic slowdown has led to a sharp decline in tax revenues. Democrats say the president's tax cut policies are making the situation even worse. But Mr. Bush says the cuts are needed to spur the economy. "We took exactly the right action, at the right time, by pushing the largest tax cut in a generation," he added.

In a speech to senior citizens in Independence, Missouri the president said even with the tax cut there is plenty of money to fund budget priorities. "This tax relief has laid the foundation for expanding economic growth," he stressed. And now we must resist the temptation of a bigger threat to growth, and that's excessive federal spending."

In an effort to shift the focus back on Congress, Mr. Bush said lawmakers must resist the urge to add pet projects to spending bills. "Every new way to spend money can be made to sound urgent, important," he said. "But we've agreed to budget limits. That's what a budget is. You set budgets at your house, the Congress set a budget that we all agreed upon. And I expect the Congress to live within the limits of the budget that we all agreed on."

The top Democrat in the House of Representatives responded with a sharply worded statement. Missouri Congressman Dick Gephardt said the tax cut will only help the wealthy, and will consume the entire available surplus.

The Democratic Party is also taking its case directly to the American people with a television ad running in a few selected cities. They include Washington and Waco, Texas - the closest city to the president's ranch. The ad claims the president's economic policies have drained the surplus to the extent the administration is eyeing money held in reserve to provide key services to the elderly. "The Bush budget raids the Medicare trust fund," says the add. "Now he's using gimmicks to hide a raid on social security."

Medicare and Social Security are two of the largest and most popular government programs. Medicare subsidizes health care for senior citizens, and Social Security provides pensions. Both are funded by special payroll taxes, and their reserves are considered part of the federal budget surplus.