Treasury Secretary John Snow has been no exception in the bandwagon touting the achievements of the Bush administration while downplaying the fact that the nation's debt limit will be reached in a matter of days. For the past few months, Snow has been one of the most vocal proponents of the president's economic plan, particularly tax cuts. And while Snow hasn't shied away from stumping for Bush in the battleground states, senior Treasury officials too have been paraded out far from Washington into politically sensitive areas including West Virginia and Pennsylvania, largely to sing the virtues of extending the tax cuts introduced by the Bush administration.
On Monday, Snow stepped up his pitch for the administration following the president's signing of the latest tax relief act, even though it was also the day key House Democrats wrote him an official letter asking him to explain how the government plans to move forward as the debt ceiling will soon be reached. The government has been borrowing money by issuing U.S. Treasury securities, and those funds have been used to finance the government's day-to-day operations.
Nevertheless, Snow tried to keep quiet about the debt problem, and instead focused more on singing the praises of the latest tax legislation signed by Bush earlier in the day. The tax relief bill authorized by the president was the fourth to be approved in four years, and is expected to affect nearly 95 million U.S. taxpayers to the tune of $146 billion, which will largely help middle-income families keep more of their paychecks, unlike some other tax breaks that have helped the top-tier income bracket more than the average wage earner.
The new tax law will keep tax credit per-child at $1,000 for the next five years, and extend the broader 10 percent tax bracket for six years, cutting taxes for almost all taxpayers across the country.
The tax break "will keep our economic recovery on track...some of the biggest winners...are the lower and middle-income families," Snow said.
In fact, even Democratic presidential candidate John Kerry has not disputed the positive impact the extension of the tax breaks will have on economic growth, as he too supported Bush's latest tax relief package in principal. But Kerry has proposed that families making more than $200,000 be exempted from the cuts. The money saved by limiting the number of taxpayers who would benefit from the cuts would be used on healthcare and education, according to Democratic policymakers.
And therein lies the problem regarding continuing and expanding tax relief, even for the wealthiest of Americans. While the tax cuts of 2001 certainly played a key role in keeping the U.S. economy from sinking into a deep recession, critics of the Bush tax plan argue that the cuts are coming at a time when government expenditure continues to surge, particularly to addressing ever-growing homeland security needs and to meet soaring military costs.
Increased spending, coupled with the tax cuts, have led the U.S. budget deficit to surge, and on Monday, the Bush administration told Congress once again that it should raise the ceiling on the national debt currently at $7.4 trillion. Treasury has warned that that limit should be reached within the next few days, and department spokesman Rob Nichols told reporters that "right before we hit it, we will notify Congress. That forecast is made on a day-to-day basis."
Key House Democrats made clear their objection to the ballooning debt, as they sent a letter to the treasury secretary Monday to request a meeting to discuss the limit and what options there are to keep spending under control. It was the second such letter Snow received from the House members, but the secretary failed to respond to the first.
"Our debt has been growing markedly faster than our economy's ability to repay it, thanks in large measure to tax cuts proposed and enacted into law by the administration and congressional Republicans," said Charles Rangel (D-NY), John Spratt, D-SC, and Charles Stenholm, D-TX, in their joint letter as they pressed the administration to take steps to balance the budget.
Treasury's Nichols said that Snow will respond to the latest letter "soon," but added that the administration had been calling on Congress to act on the debt ceiling issue for months.
In an interview with CNBC later Monday when he was questioned about when the government could stop cutting taxes and start addressing the debt issue, however, Snow said that cutting taxes never had to be an option for keeping national debt levels under control. Rather, the treasury secretary reiterated that with robust growth, the U.S. economy should be able to afford the tax cuts in the longer-term.
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