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Bush Budget Receives Frosty Response From Democrats

by Leroy Baker, Tax-News.com, New York

08 February 2007


John Spratt (D - SC), Chairman of the House of Representatives's Budget Committee, has warned President Bush that Democrats, who now control Congress, will be unlikely to support his budget proposals for fiscal year 2008, announced earlier this week.

Responding to Monday's budget statement, Spratt said Bush's assertion that he could balance the government's books by 2011 were overly optimistic and unrealistic given that the budget plan calls for the extension of tax cuts and proposals for further growth-spurring tax breaks for US industry.

“While the President has endorsed the goal of balancing the budget, under realistic assumptions his budget remains in deficit every year. The deficit for fiscal 2006 was $248 billion, and deficits will hover in roughly that range over 2007, 2008, and 2009. When the surplus in Social Security is excluded, as it should be, on-budget deficits over those three years will exceed $400 billion," Spratt stated.

He also suggested that Democrats would be unlikely to support the swingeing cuts in health and education spending programs, nor the privatization of social security proposed by the White House to help achieve deficit targets.

“The President calls for nearly $2 trillion in tax cuts, so in the name of balancing the budget by 2012, he hits domestic priorities such as health care, education, and the environment. The Bush budget calls for $252 billion in Medicare cost reduction over 10 years without reinvesting those savings in Medicare program improvements, plus $28 billion in net legislated Medicaid cost reductions," he observed.

Spratt also took issue with the budget's revenue projections, which claim that revenue growth will average 7% annually for the next five years, "well above the 5.8% rate predicted by the Congressional Budget Office (CBO)."

While CBO says that extending the 2001 and 2003 tax cuts would cause average annual revenue growth to drop to just 3.8%, the administration claims revenue growth would still average 5.6%.

"This difference means that the Administration claims that there will be $157 billion more in revenues in 2012 than CBO says will be the case if the tax cuts are extended," Spratt said.

“I doubt that Democrats will support this budget, and frankly, I will be surprised if Republicans rally around it either," he predicted.

Meanwhile, Charles Rangel (D - NY), Chairman of the House Ways and Means Committee, with jurisdiction over tax, believes that Bush has missed an opportunity to work with the Democratic majority to formulate a bipartisan consensus on tax and spending issues, and accused the President of early electioneering.

"I look at some of the cuts proposed in this budget - $637 billion for Social Security privatization, $66 billion out of Medicare, further restrictions to food stamps, cuts to Medicaid and children’s programs, and the request that we make permanent his tax cuts - it sounds to me like this is pre-campaign talk from the President and I just want someone in the White House to acknowledge that Democrats won and that we want to work with Republicans," Rangel said.

“To truly cooperate, the President must understand that he has missed critical opportunities to show leadership," Rangel added. "I know the Administration can reach out to Congress and make us feel like we have a job to do without sacrificing any principles. It’s going to be difficult and it’s going to be politically painful, but it will be less painful if the President is on board."

Max Baucus (D - Mont.), Chairman of the powerful Senate Finance Committee, who supported and helped write the 2001 tax cut package, also cautioned that Congress and the White House must cooperate to "realistically and responsibly" fund America’s priorities from health care to tax relief.

“In some places this budget shows vision, and in some places the President’s eyes are shut tight to this country’s fiscal reality," Baucus said. "While the budget does address some vital priorities, its omission of war and tax costs shrinks deficits smaller than they are and shows surpluses that don’t exist."

Although supporting extension of the 2001 tax cuts, Baucus warned that the budget muddies the waters regarding the government's future fiscal position.

“I helped to write the 2001 tax cuts, and I would like to see them extended. Exactly what our fiscal situation will allow remains to be seen, and this budget does not make the picture much clearer," he stated.

Baucus also bemoaned the lack of a concrete plan to abolish the alternative minimum tax, which, according to Spratt, will hit 23 million taxpayers in 2007, while also criticising the administration's proposals to narrow the gap between legally owed taxes and what is actually paid to the IRS.

“Proper IRS funding is essential when it comes to collecting the $345 billion in taxes owed but unpaid every year," he argued. "I don’t see many new ideas here for closing the tax gap."


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