WASHINGTON, Feb. 3 (UPI) -- The $304 billion fiscal 2004 budget deficit proposed by the Bush administration will raise interest rates and stymie economic growth, Democrats said Monday.
They said the proposed tax cuts of more than $670 billion on top of the already passed $1.35 trillion tax cut and will only exacerbate the problem.
The Bush administration released the budget Monday, which includes a $307 billion deficit for 2005, and Democrats noted these figures failed to include the costs associated with a likely invasion of Iraq. Most estimates of such a war range from $60 billion to $200 billion.
The record deficits will hurt economic growth and cripple entitlement programs as the rapidly aging population inches toward retirement age, Sen. Kent Conrad, D-N.D., the ranking Democrat on the Senate Budget Committee, said in a statement.
"President Bush's budget not only proposes record deficits this year and next, but his plan has this nation dangerously awash in red ink for as far as the eye can see," he said. "His plan will push up interest rates, retard economic growth, and create massive problems for the soon-to-be retiring baby boom generation."
The Bush administration used predictions of a record $1 trillion surplus to push through its tax cut proposal. But those cuts -- combined with the slowing economy -- stunted tax revenue, leaving the federal government back in deficit.
Undaunted by these figures -- administration and GOP officials claim they are the result of slow growth and not tax cuts -- Bush has proposed an additional tax cut for stock dividend proceeds. He has also proposed making the $1.35 trillion tax cut -- which would expire in 10 years -- permanent. And he would implement it even faster, to stimulate the economy.
But the record deficits -- regardless of their cause -- will make the dividend tax cut and Bush's proposed $400 billion expansion of Medicare benefits even harder to sell to the conservative Democrats and moderate Republicans he needs to pass the measure.
Louisiana Democratic Sen. John Breaux last week expressed some skepticism that the president's proposed prescription drug benefit was viable without an overhaul of the Medicare program that he described as in deep trouble.
"Just adding prescription drugs today, while politically popular, without reforming an outdated Medicare program that is going broke, would be a huge disservice, tomorrow, for our children and our grandchildren," he said.
"At the end of the day, the big question will be whether we have the political courage to work together to improve the underlying Medicare program to justify spending more than $400 billion to offer a new prescription drug benefit for all older Americans," he added.
Breaux is considered a key figure in the narrowly divided Senate. While generally receptive to tax cuts, Breaux's support is seen as mandatory for any Republican initiatives looking to pass the upper chamber.
House Budget Committee Chairman Jim Nussle, R-Iowa, implied that the long-term effects of the president's tax cut proposals were more important to the economy than a short-term budget deficit that he -- and other conservatives -- continue to blame on the sluggish economy.
"It is important to note that the circumstances that initially erased the surpluses and brought us into deficit are still present," he said in statement. "Our priorities must be clear -- protect the homeland, provide the resources to win the war against terrorism abroad, and get people back to work by strengthening the economy.
"We must enact measures that grow the economy. We need to be thinking not just about tomorrow but next year, five years and even 10 years from now. Our budgets need to look beyond the next election and towards the next generation."
