Bush defends his tax-cutting policies

WASHINGTON -- President Bush, facing election-year criticism from Democrats, defended his tax-cutting policies Monday and blamed emerging federal budget deficits on the recession and America's war against terrorism.

He pledged to resubmit his economic revival package to Congress in a budget proposal that Democrats are poised to criticize. After nearly five years of surpluses in Washington, the president said, "We may not balance the budget for this year."

White House officials said late last year that the costs of war and battling terrorism had made annual federal deficits likely for at least the next three years. But Bush's remarks Monday, in a rare public session with Federal Reserve Chairman Alan Greenspan, marked the first time he had publicly acknowledged the government's budget woes.

Offices at stake

Both parties view the lagging economy as the key issue in November elections, when control of Congress and three dozen statehouses will be at stake.

Democrats blame vanishing budget surpluses on the 10-year, $1.35 trillion tax cut Bush pushed through Congress last year. Republicans, led by the president, are seeking to portray critics of the package as partisan tax-raisers.

"I hope that when Congress comes back they will have listened to their constituents and that Congress will realize that America, like me, is tired of partisan bickering, that we ought to come together, we ought to unify around some sensible policy and try not to play politics with tax relief or for that matter economic stimulus packages," Bush said.

Some Democrats have sought to keep tax breaks for corporations and affluent taxpayers from taking effect. Senate Majority Leader Tom Daschle, D-S.D., stopped short of making that plea but said last week that Bush's 2001 tax cuts worsened the recession and closed out a brief era of budget surpluses.

Bush said he warned Americans last year that a war, recession or a national emergency might force the government to run deficits. He hinted at plans to dramatically increase spending on the military and defenses against terrorism, without saying what, if any, programs would be cut to pay for the budget shifts.

"It makes sense to spend money necessary to win the war. It makes sense to spend money necessary to protect the homeland," Bush said.

According to congressional aides, Bush's $2 trillion budget -- which he will unveil on Feb. 4 -- is expected to propose about $730 billion for domestic and defense programs, excluding automatically paid benefits like Social Security.

That is $24 billion, or 3.4 percent, more than this year's levels.

Boost for defense

The budget is expected to include at least a $20 billion boost over this year's $345 billion defense budget and increases of at least $15 billion for homeland defense efforts, like combating bioterrorists.

To help pay for the increases, he will seek savings from other domestic programs, such as water projects and other home-district spending items, the Interior Department and some social service programs, officials say.

Bush shrugged off Democratic charges that his tax cuts caused the deficits.

"By reducing taxes at a time when our economy was slowing down, the Congress, working with the administration, did the absolutely right thing to provide a stimulus," the president said.

He cut off questions to Greenspan, who sat opposite the president at a polished wood conference table in the Cabinet Room. Bush's advisers filled the other chairs.

"I'm optimistic that 2002 is going to be a better year than 2001, and we will discuss ways here to ... figure out how government can make that happen," Bush said.

Greenspan, head of the independent board that sets monetary policy, rarely makes public appearances at the White House. He appeared with President Clinton, a Democrat, to support open trade policy toward China and made a brief public showing with President-elect Bush shortly after the 2000 election.

With voters united behind his stewardship of the war against terrorism, Bush is trying to show concern for the lagging economy without being blamed for it.

"We're making good progress on winning the war in Afghanistan and we've got to make good progress about helping people find work," he said.

Bush suggested that Democrats didn't want an economic stimulus bill to pass last year. The Democrats offered a plan of their own and said the GOP blueprint would have helped corporations more than hard-hit workers.