WASHINGTON, March 4 (UPI) -- Paying for homeland security and the war on terrorism is more important than balancing the budget, U.S. Treasury Secretary John Snow said Tuesday.
Addressing the U.S. Chamber of Commerce, Snow said that while a balanced budget was ideal, paying for national security must take precedence.
"Deficit numbers are never welcome ... but to fight terrorism, put people back to work, push up the economy, and build homeland security ... we can't do all that without a deficit," he said.
Snow was confirmed to the post last month, after Paul O'Neill was effectively forced from office at the end of last year.
He also argued that the projected U.S. deficit is "modest and manageable," with little fear that it would cause higher interest rates or curb domestic and foreign investment.
The Office of Management and Budget reported last month that it expects the deficit to be $304 billion this fiscal year, rising to a record of $304 billion in 2004. Those figures don't include the cost of a possible war against Iraq, which some policy-makers have said could reach $50 billion to $200 billion for the actual war. The cost would rise considerably should U.S. troops remain actively engaged in the region.
At the same time, the administration continues to press for tax cuts, most prominently the end of double taxation on dividends. The administration has argued that eliminating the dividend tax would support financial markets and in turn buoy the economy.
Many Democrats, and some more moderate Republicans, claim that given the fragile state of the economy, the actual result would be that spending will far outpace revenue and lead to capital flight from the United States.
But Snow pointed out that even Federal Reserve Alan Greenspan was not concerned about the deficit, at least at current levels.
"The chairman is a deficit hawk ... (but he) sees no problems (with the deficit) at current levels," Snow said.
However, Greenspan did warn the Senate banking committee last month that balancing the budget should be a priority, given that spending pressure was far outpacing revenues. The Fed chairman also warned that it was too early to determine whether further tax cuts were needed, given that economists were still divided on whether the economy was being held back by economic fundamentals or geopolitical concerns.
As for growth prospects, Snow said that while there were risks, namely geopolitical uncertainties, the continued weakness in the job market and the weak stock market, he believed that long-term potential remained solid.
Geopolitical risks in particular are "all going to pass soon, I hope," Snow said, adding that the administration was particularly committed to ensuring longer-term growth.
The White House's economic proposal hinges on securing $1.3 trillion in tax cuts over the next 10 years. The administration expects that this proposal will add a full percentage point to the gross domestic product growth rate, as well as 1.4 million new jobs this year alone.
Snow was scheduled to testify before the House Ways and Means Committee later Tuesday to promote the administration's economic proposal.
