Paulson says budget can be balanced with strong economic growth

WASHINGTON (AP) _ The Bush administration urged skeptical members of Congress on Tuesday to support the president's new $2.9 trillion spending plan, arguing that the budget can be balanced without

Tuesday, February 6th 2007, 6:45 am

By: News On 6

WASHINGTON (AP) _ The Bush administration urged skeptical members of Congress on Tuesday to support the president's new $2.9 trillion spending plan, arguing that the budget can be balanced without raising taxes.

``We are submitting a budget that includes a surplus in 2012, which is achievable if we keep our economy growing,'' Treasury Secretary Henry Paulson told the House Ways and Means Committee.

Paulson disputed contentions by Democrats that the budget achieves its projected $61 billion surplus in 2012 by adopting overly optimistic economic assumptions.

``While no one has a crystal ball, our economic assumptions are close to the consensus of professional forecasters,'' Paulson said.

Paulson has been given the task by President Bush to see if a consensus can be reached on overhauling the government's huge benefit programs such as Social Security and Medicare. He said he looked forward to sitting down with Democrats and Republicans to see if a bipartisan consensus can be obtained.

He said the reductions in the new budget in spending on Medicare and Medicaid would lay the foundation for more comprehensive reform of the benefit programs.

But House Ways and Means Committee Chairman Charles Rangel, D-N.Y., said he saw the budget as a missed opportunity on the part of Bush to reach out to Democrats, who for the first time in Bush's presidency control both the House and Senate.

``The president has to be a party to this. He can create a climate that would allow us to move forward in a bipartisan way,'' Rangel said.

The $2.9 trillion Bush budget for the budget year that begins next Oct. 1 would provide a massive boost for the Defense Department, seek an additional $245 billion in spending on the wars in Iraq and Afghanistan for this year and 2008 and restrain spending across a wide swath of the rest of government.

The spending restraints allowed Bush to project gradually declining deficits, with the budget going into surplus in 2012, three years after he has left office. His spending plan would make his first-term tax cuts permanent, at a cost over the next decade that the administration estimates at $1.6 trillion.

``Congress needs to listen to a budget which says no tax increase and a budget, because of fiscal discipline, that can be balanced in five years,'' Bush said Monday in releasing his budget.

Democrats, however, charged that the president is able to produce a surplus only on paper by using overly optimistic assumptions about how much revenue the economy will generate over the next five years and by leaving out expensive items such as further war costs after 2009 or providing money beyond this year to fix the alternative minimum tax so that it doesn't hit millions of middle-income taxpayers.

``This budget is just disconnected from reality,'' said Senate Budget Committee Chairman Kent Conrad, D-N.D.

House Budget Committee Chairman John Spratt, D-S.C., said he doubted Bush's plan would garner much support from Democrats or Republicans, calling the surplus projection ``a very improbable assumption to say the least.''

The task facing the Democrats is no less daunting. When Republicans were in control last year, they failed to pass the appropriations bills needed to operate most government agencies, falling back on a stopgap spending measure that Congress is still grappling with four months into the current budget year.

Democrats are pledging to do better. Conrad said the Democratic alternative to the Bush budget would adopt a more fiscally responsible pay-as-you go approach that will require any new tax cuts or spending increases in government benefit programs to be paid for.

Democrats pledged to restore Bush's cuts in such programs as low-income heating subsidies, Head Start for preschool children and rural health care programs.

Bush also proposed eliminating or sharply reducing 141 federal programs at a savings of $12 billion. Congress has ignored many of the same recommendations in previous Bush budgets.

Bush proposed a few high-profile spending boosts, such as an increase in the maximum Pell grant for low-income students, from the current $4,050 to $4,600. The $15 billion cost over five years would largely be borne by cutting subsidies to lenders issuing student loans.

The president's budget also included the initiative he featured in his State of the Union address to expand health care coverage for the uninsured through a complex approach that would make employee-provided health insurance taxable but give every family a $15,000 tax deduction in an effort to encourage those who don't get health insurance through their employees to purchase policies.

Democrats strongly oppose the idea, saying it would encourage businesses to drop their coverage.