WASHINGTON, March 4 (UPI) -- The Bush administration's proposed $1.3 trillion tax cut would secure jobs, accelerate and sustain economic recovery, increase workers' standards of living and increase the economic performance of the country, U.S. Treasury Secretary John Snow said Tuesday before a congressional panel.
Critics argue that President George W. Bush's plan will do little to stimulate the U.S. economy and send the government's budget deep into deficits.
Testifying before the House Ways and Means Committee, Snow defended Bush's plan, concentrating on tax cuts, most prominently the end of double taxation on dividends. Snow said that eliminating the dividend tax would support financial markets and in turn buoy the economy. The tax proposal needs congressional approval.
Republicans on the committee largely supported Snow's proposals, asking questions that allowed the Treasury secretary to further pitch the Bush plan.
Democrats, however, sharply questioned Snow about the costs of a war with Iraq, saying there is no contingency for paying for potential wars with Iraq and North Korea.
"I can't see how we can talk about a dramatic cut in taxes when we have no clue about the costs of a potential war," said Rep. Charles B. Rangel, D-N.Y.
Rep. Jim McDermott, D-Wash., asked how the country could afford a war without raising taxes. "Every single war, we've raised taxes," he said.
Snow said the country could afford to wage war against Iraq, but avoided giving definitive cost estimates for such a war. The cost of any war would be small in relation to the country's gross domestic product, he said.
Projecting war costs would be premature since Bush hasn't decided yet to go to war against Iraq, Snow said.
"The president is really trying to avoid a war. War is really the last option," he said.
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.
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 $307 billion in 2004.
Those figures don't include the cost of a possible war against Iraq, which some policy-makers have said could range from $60 billion to $200 billion for the actual war. The cost could rise considerably should U.S. troops remain actively engaged in the region.
Committee Chairman Bill Thomas, R-Calif., has said he hopes the committee can complete a tax bill in time for House passage by the end of March.
Republicans are expected to use their majority to win approval for legislation along the lines Bush has proposed. Success for Bush's proposals in the Senate are less clear, since Republicans have a narrow majority, and some moderates have signaled opposition to the dividend proposal and other elements.
Earlier in the day Snow told the U.S. Chamber of Commerce that paying for national security takes precedence over balancing the budget.
Federal Reserve Chairman Alan Greenspan warned 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.