WASHINGTON, Jan. 15 (UPI) -- Although looming budget deficits are of concern amid a troubled U.S. economy, cutting the red ink is not the top priority while the Bush administration continues the war on terrorism, says Mitch Daniels, director of the Office of Management and Budget.
"No one is happy about it (the deficit)," said Daniels, adding, however, there have been "extraordinary" demands on government spending while the United States continues to fight terrorism and increase homeland security measures.
Selling the recently announced $674 billion Bush economic stimulus package at a U.S. Chamber of Commerce luncheon Wednesday, Daniels defended the package's income and stock dividends cuts, which add to the deficit, as measures needed by the lagging economy.
Tax cuts account for around 98 percent of the stimulus package, some estimates say.
Chamber head, Thomas Donohue, vowed the nation's largest business association would support the passage of Bush's proposed package.
Daniels vowed fiscal discipline on domestic spending and said that administration expected budget deficits for the "foreseeable future" because of military and security spending. He called those deficits "modest" and "manageable at this level."
Daniels noted that if the Bush economic plan were enacted, the deficits expected for this year and the next will hit between 2 percent and 3 percent of gross domestic product. That figure, he said, was half the historic high, which would put the deficit in the $200 billion to $300 billion range for the current fiscal year and fiscal year 2004 that begins Sept. 30.
The economic stimulus plan would account for around $100 billion of this deficit in fiscal year 2004.
U.S. GDP, the sum of all goods and services produced in the United States, is around $10 trillion a year.
Under the Bush administration's proposal, reductions in income tax rates in excess of 15 percent scheduled for 2004 and 2006 would be moved forward to the current year, resulting in new marginal tax rates of 25 percent, 28 percent, 33 percent and 35 percent (down from 27 percent, 30 percent, 35 percent and 38.6 percent).
Although the proposed legislation only calls for the implementation of these cuts until 2010, Daniels said the president hopes "to make the tax cuts permanent."
The package also calls for increasing the amount of the child tax credit to $1,000 in 2003 (from $600), accelerating a scheduled phase in over the period between 2005 and 2010. If passed, the increased amount of the child tax credit will be paid in advance beginning in July 2003 on the basis of information on the taxpayer's 2002 tax return filed in 2003.
Daniels noted that advance payments would be made in a manner similar to the tax rebate checks that were issued in 2001.
Also, the Bush plan calls for the creation of Personal Re-employment Accounts that would provide unemployed workers with up to $3,000 to use for job training, child care, transportation, moving costs, or other expenses associated with finding a new job.
The plan would give states $3.6 billion to fund these accounts. The program would be administered through the One Stop Career Center system and would work through existing state unemployment systems to deliver these benefits.