(The following Reuters article by Glenn Somerville appeared on Yahoo News.)
WASHINGTON — John Snow, in his first appearance before Congress as U.S. treasury secretary on Tuesday, defended the Bush administration’s budget and stimulus plans and the record deficits they will bring, saying red ink was necessary now to spur future growth.
“Deficits matter. They are never welcome,” Snow told the tax-writing House of Representatives Ways and Means Committee (news – web sites). “But there are times, such as these, when they are unavoidable, particularly when we are compelled to address critical national needs.”
In a lengthy hearing that featured some spirited sparring with Democrats who claimed the country was heading for a sea of red ink if the budget was approved, Snow maintained deficits remained low by historical standards and that it was necessary to take action to spur the economy.
DEFICIT ‘MANAGEABLE’
“The deficit is modest relative to historical circumstance and modest relative to the circumstances we find ourselves in — and most importantly, it’s going to be declining.”
“It’s a manageable deficit,” Snow insisted, noting it was much smaller as a percentage of national output than was the case during the deficit-ridden 1980s. “It’s a prudent investment in our future.”
The railroad executive, a deficit hawk in the past, was picked by President Bush (news – web sites) to replace former Treasury Secretary Paul O’Neill, who was ousted in December.
Snow was sworn in on Monday and is embarking on a round of Congressional hearings to sell lawmakers on the Bush administration’s budget and proposals for stimulating growth, including the elimination of taxes on dividends.
The $2.23-trillion budget Bush sent to Congress on Monday envisages record deficits of $304 billion in the current fiscal year, which ends Sept. 30, and $307 billion in fiscal 2004 — both surpassing the 1992 record gap of $290 billion.
Snow said the U.S. economy was resilient but needed a boost to create jobs. The best way to put it on a faster growth track — and wipe out deficits — was to lighten the tax burden in order to encourage consumers to spend and companies to invest he added.
“The prescription for returning to balanced budgets is straightforward: hold the line on spending and grow the economy,” the new Treasury chief said.
Opposition Democrats have begun a broad-based attack on the proposals both on the grounds that they push deficits — the shortfall between the government’s spending and its income — higher and that they unfairly offer the largest benefits to the wealthiest Americans.
NO WAR ESTIMATES
Democrats on the panel pushed Snow to estimate the potential cost of a war with Iraq, but he responded it was “awfully speculative” to try to do so and said Bush was trying to avoid a war. He said he had not discussed with Bush how much a war might cost.
Part of Bush’s proposal for stimulating the economy, a centerpiece of his $695-billion economic stimulus program, is the elimination of taxes on dividends. In response to skeptical questions about the value of ending dividend taxes, Snow said there was an “almost overwhelming” case for ending them because they now are taxed twice — once when companies earn profits and again when shareholders receive dividends.
Ways and Means Committee Chairman Bill Thomas, a California Republican, said he expected the committee to act on the president’s economic plan by the end of March and move it to the full House. He plans to hold more hearings on the president’s plan and suggested there could be some changes.
“My hope is that if people don’t like the suggestions of the president’s package they would offer creative alternatives to addressing the same problem or present reasons why what appears to some to be a problem is not a problem,” Thomas told reporters following the meeting.
Snow said the economy had undergone “extreme adversity” but was shaking it off. “Despite a sequence of economic slowdown, attack on our homeland, war in Afghanistan (news – web sites) and weakened investor confidence, the economy is recovering,” he said.
But more is needed, he argued. “I think it’s recovering, it’s not as certain or as strong as I would like it to be.”
“As long as there are Americans who want a job and can’t find one, the economy is not growing fast enough,” Snow said.
The wealthy industrialist said Bush had offered “precisely the right medicine” in the form of reduced taxation after the economy began to slow in 2000.
He said tax relief in 2001 and additional stimulus measures last year helped keep the recession in 2001 “shorter and shallower than it would have been.”