Dems gear up to contest Bush’s budget

John Dimsdale Feb 5, 2007

Dems gear up to contest Bush’s budget

John Dimsdale Feb 5, 2007

KAI RYSSDAL: Ask any economist, and they’ll tell you. Before you can figure out what the future holds, you have to lay out the ground rules. Assumptions they’re called.

The president makes a few of them in the budget he sent up to Capitol Hill today. Steady economic growth and low inflation, to start with. Probably not so controversial.

But our Washington bureau chief John Dimsdale reports the president’s assumptions look more questionable down at the other end of Pennsylvania Avenue.

JOHN DIMSDALE: The president’s budget increases defense spending, including $141 billion for the war in Iraq, expands health care, tuition grants and ethanol incentives, while making tax cuts permanent and eliminating the deficit by 2012.

Democrats, like Senate Budget Committee Chairman Kent Conrad

of North Dakota, say he can’t do it all

KENT CONRAD: The president’s proposals, if adopted as presented, would take us right over the cliff into a chasm of debt.

One likely source of friction will be the president’s ideas to cut domestic spending. Especially unwelcome will be a proposal to save nearly a hundred billion dollars on entitlements such as Social Security and Medicare.

Democrats say they can avoid reductions in social programs by rescinding the president’s tax cuts on the wealthy. But the president’s budget director, Rob Portman

, says that’s a nonstarter.

ROB PORTMAN: To increase taxes would put at risk the economy that’s generated the revenues that are largely responsible for putting us in a better fiscal condition.

Another way Democrats plan to bankroll their own ambitious agenda is to close the tax gap — uncollected taxes on income people hide from the government. The IRS estimates the tax gap is $290 billion a year — a potential fat source of revenue.

But on C-SPAN this morning, the IRS’ taxpayer advocate, Nina Olson

, said it’s difficult to collect the government’s take from the cash economy.

NINA OLSON: That can range anywhere from the vendor on the street selling who is hotdogs, to the person mowing your lawn, to people making sales on eBay because right now there’s no reporting of that.

The White House budget anticipates earning $29 billion over the next 10 years by requiring better reporting of cash transactions — and the capital gains earned by stock investors.

In Washington, I’m John Dimsdale for Marketplace.

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