updated 1/7/2004 12:55:42 PM ET 2004-01-07T17:55:42

While concerned about soaring budget deficits, the Bush administration is confident that a rebounding economy will help cut the deficit in half within five years, Treasury Secretary John Snow said Wednesday.

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Snow rejected calls by many of the Democratic presidential candidates to roll back some or all of the president’s massive tax cuts, which they blame as a major factor in the exploding federal deficits.

Snow said that instead of rolling back the tax reductions, which Democrats contend have gone overwhelmingly to the wealthy, they should be made permanent. He said if the 2001 and 2003 tax cut bills had not been passed, 109 million taxpayers would face tax bills this April 15 that would be on average $1,544 higher.

“Let me be perfectly clear: Failure to make the tax relief permanent would be a huge mistake and would put our recovery in jeopardy,” Snow said in prepared remarks to the U.S. Chamber of Commerce.

Snow said that the federal government does face a deficit “in the $500 billion range” in the current fiscal year, which would be a record in dollar terms. However, Snow said this deficit will represent roughly 4.5 percent of the total economy, as measured by the gross domestic product, compared with a modern-day peak of 6 percent set in the 1980s when Ronald Reagan was president.

He said the $500 billion deficit “is not historically out of range and it is entirely manageable.”
But he also conceded that the deficits are a “matter of concern” that the administration intends to deal with by working with Congress to impose spending restraint on government programs.

“With adoption of the president’s policies, our projections show a solid path toward cutting the deficit in half, toward a size that is below 2 percent of GDP, within the next five years,” Snow said.

Snow said this effort would “dramatically” improve the budget situation.

In the new budget the president will send Congress on Feb. 2, the administration is expected to propose limiting the growth of discretionary programs to 4 percent, perhaps excluding defense and domestic security.

The administration has faced recent attacks from conservatives unhappy over a surge in government spending since Bush took office.

While Bush has emphasized repeatedly the need to rein in spending, overall federal expenditures have grown to an estimated $2.31 trillion for the current budget year that started Oct. 1. That is up 23.7 percent from the $1.86 trillion spent in President Clinton’s final year, a rate of growth not seen for any three-year period since 1989 to 1991.

Much of the increase stems from the fight against terrorism and wars in Afghanistan and Iraq. Also expanding relentlessly have been huge programs such as Social Security, Medicare and Medicaid, which grow automatically with inflation, higher medical costs and more beneficiaries.

But conservatives have complained about the 31.5 percent growth in discretionary spending since Bush took office. That is the one-third of the budget lawmakers approve annually for defense, domestic security, school aid and everything else except Social Security and other benefits. Such spending grew by an annual average of 3.4 percent during the Clinton administration’s eight years in office.

After his speech, Snow was asked by reporters if the administration was concerned that the value of the U.S. dollar has been hitting record lows against the Euro in recent weeks.

Snow said this development did not reflect any change in the administration position of supporting a strong dollar while letting the dollar’s value be set by the markets.

“A strong dollar is in U.S. interest and the exchange value of the currency should be set in open competitive markets,” Snow told reporters.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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