Bush prepares budget speech for Congress

Possible budget battle looms

In this story: Tax cut delay is 'flawed,' budget chief says Kerry warns of deficit spending Programs would be cut, trimmed RELATED STORIES, SITES

WASHINGTON (CNN) -- As President George W. Bush worked on the final details of a budget proposal to be unveiled this week, Democrats on Sunday stepped up their attacks on the president's tax-cut proposal.

Bush will present his budget proposal Tuesday before a joint session of Congress. But Democrats on Sunday zeroed in on the centerpiece of Bush's proposal, a $1.6 trillion tax cut over 10 years.

Sen. John Kerry, D-Massachusetts, said on NBC's "Meet the Press" that the tax-cut plan would turn out to be Bush's "first significant mistake."

Bush administration officials remained optimistic about passage of the budget. "We think the votes will be there, and there will be more votes there after people ... have seen our overall plan," said White House Budget Director Mitch Daniels on "CNN's Late Edition with Wolf Blitzer."

INTERACTIVE How will Bush's proposal affect your tax bracket?   IN-DEPTH CNNfn: Tax Time   ALSO First lady sets a light Texas tone in first formal dinner Democratic governors an upbeat minority     MESSAGE BOARD Taxing and spending

Kerry said Bush's tax-cut proposal will put a squeeze on various programs. Once funding for Social Security, Medicare and other non-negotiables have been subtracted from the $5.6 trillion surplus projected over the next decade, only $100 billion would be left "to do everything that you have to do for the rest of government," the senator said. "I can tell you, there is no way possible to do that."

Not so, said Sen. Pete Domenici, R-New Mexico, "The issue is, can we afford $1.6 trillion returned to the American people?" he said on NBC. "I've come to the conclusion that we can."

Tax cut delay is 'flawed,' budget chief says

Federal Reserve Board Chairman Alan Greenspan has suggested that if projected surpluses don't materialize tax cuts should be postponed.

California's Gov. Gray Davis, a Democrat, agreed. "I believe you wait until the money is there before you give it back," he said on NBC.

But Daniels said Greenspan's proposal "is flawed conceptually and mechanically impossible."

Kerry criticized the Bush tax-cut proposal as disproportionately favoring America's wealthiest. The top 1 percent of Americans, people who earn more than $319,000 per year, pay 21 percent of the tax burden, but will get 43 percent of the money back, he said. And 25 million low-income Americans who pay no income tax, but do pay payroll taxes, will get no money back. "That's wrong; that's simply wrong," Kerry told CNN.

But credits on income taxes can only go back to people who have paid income taxes, Domenici said.

While not disputing that the rich would receive the most money back in absolute terms, Daniels said lower-income earners come out on top in percentage terms. "The people who do the best are the people, actually, at the lower end of the scale," he said.

"By far, the highest percentage tax reduction will go to those working Americans in the lower brackets," Daniels said.

Kerry warns of deficit spending

Bush's tax-cut proposal threatens to return the U.S. government to deficit spending, Kerry said. The national debt grew from $909 billion in 1981, when President Reagan entered office, to $4 trillion by 1993, when President George Bush left office, he said.

The Democrats have a better alternative, Kerry said. "We want to make sure we pay down the debt. We want to make sure we can invest in the future of this country ... and we want to make sure we have a tax cut for every American," Kerry said.

But tax cuts were not the cause of the Reagan-era deficits, said Sen. Chuck Hagel, R-Nebraska, "The problem with the Reagan years is the second half of that bargain was not fulfilled, and that was to control spending," he said.

The demographics of an aging population mean the budget surplus will be eaten up unless the Social Security and Medicare programs are changed, Daniels said. Bush will discuss changing the programs when he submits his budget to Congress, Daniels said.

"We ought to have a system that provides tomorrow's retirees with as fair a deal as today's," Daniels said. "Right now, we don't have that system."

The budget proposal will slow the average pace of budget increases from 8 percent last year to 4 percent, Daniels said. Spending in some areas will be higher -- such as education with a projected 11 percent increase -- a move that means other areas will have budget increases of less than 4 percent, he added.

Programs would be cut, trimmed

Daniels did not specify which programs would be trimmed under the plan. Programs that are duplicative will be scrutinized, he said. "We have 50 programs for the homeless sprawling across eight departments of government," he told CNN. "Those are not particularly the ones we're looking at here, but we have to be careful with duplication of that kind."

CNN White House Correspondent Kelly Wallace reported that some of the savings would come from cutting subsidies for corporate research and investment, and eliminating some programs entirely.

Some programs have simply outlived their usefulness and are no longer needed, he said. "Washington has a tough time declaring victory and stopping anything," he said.

And subsidies to corporations may be pared, though not killed. "We are looking at, in some cases, trimming as opposed to outright elimination," Daniels said.

CNN White House Correspondent Kelly Wallace contributed to this report.

Bush, Democrats outline budget differences
February 24, 2001
Bush to highlight waste, call for new budget priorities
February 23, 2001
Bush unveils 'fiscally responsible' budget
February 22, 2001
Bush moves to increase federal spending on education
February 21, 2001

The White House
  •  U.S. President George W. Bush

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.