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Budget doesn't include war costs

WASHINGTON — Republican budget writers are pressing ahead with plans for up to $1.3 trillion in tax cuts over the next 11 years, untroubled by bulging deficits and uninformed about costs of a potential military conflict in the Persian Gulf.

The deficits and the shadow of war are not helping these Republican leaders build broad coalitions in support of the tax cuts. Moderate and some conservative Republicans, not to mention Democrats, are rejecting the large tax cuts in favor of something smaller or nothing at all.

Lawmakers face three fundamental questions: How long will the war last and how much will it cost? Will the post-war economy rebound or will it need a boost? Will deficits grow and what are their long-term consequences?

But the war gives President Bush potential leverage to get much of what he wants. A short, successful operation in Iraq that deposes Saddam Hussein and captures caches of weapons of mass destruction would boost his political standing and make him a formidable force in Congress.

"If he's right about the war, then, yes, nothing succeeds like success," said Ed Gillespie, a Republican lobbyist with close ties to the White House.

Grover Norquist, a prominent conservative strategist, said Congress has given Bush recurrent "honeymoons" — immediately after his election, after Sept. 11, and yet another after last November's congressional elections.

"This president has been re-virginized," he said this week, fresh from a White House meeting with Bush political guru Karl Rove. "If we have a clean war and all goes well, George Bush will be back up to 70 percent approval ratings."

But time is working against Bush. Congress will begin floor debate on the House and Senate budget proposals this week. And even though tax-cutting legislation may not be ready until mid-to-late April, the budget will lock in on a maximum number for tax relief that would be difficult to exceed later without a super majority of the Senate.

"I can't imagine that all the turmoil we've created in the world could be lessened that fast," said Sen. Lincoln Chafee, a Rhode Island Republican who opposes any tax cuts and has been a critic of the war build up.

The president's tax-cutting plans fall into three different categories. He would extend the 2001 tax cuts permanently, cutting revenue by $600 billion through 2013. He would eliminate dividend taxes on investors, reducing revenues by $360 billion over the same period. And he would accelerate tax cuts and provide other types of tax relief and some spending as an economic stimulant for a total of about $366 billion, much of that occurring this year and in 2004.

Hardly anyone in Congress believes lawmakers will permanently extend the 2001 tax cuts this year. But the House and Senate budget proposals would set up special instructions to protect the $726 billion in stimulus and dividend tax cuts from a filibuster in the Senate. Filibusters, or extended debate, require 60 out of 100 votes to overcome.

Advocates of Bush's stimulus and dividend tax cut cite an analysis by the conservative Heritage Foundation that estimates it would create nearly 1 million jobs and $178 billion in additional disposable income in 2004.

For now, however, the drums of war are muting tax cutting enthusiasm. Senate Republicans are having trouble mustering support for the budget among moderate Republicans and Democrats who backed Bush's $1.3 trillion, 10-year tax cut in 2001.

Sen. John Breaux, D-La., last week offered a compromise to cut taxes by $350 billion over 11 years. After shopping the proposal for several days, he managed to get only four signatures on the plan — his own, Sen. Max Baucus, the ranking Democrat on the tax-writing Finance Committee, and Republican Sens. Olympia Snowe of Maine and George Voinovich of Ohio.

Other members of the Centrist Coalition refused to get on board, saying they'd rather wait until after the war to decide what, if any, tax cuts were needed.

"If you're going to fix the economy, the question is which economy — pre-Iraq or post-Iraq?" asked Sen. Ben Nelson, a conservative Democrat from Nebraska who backed Bush's 2001 tax cut. "If you're going to make a mistake, even $100 billion is too much."

Looking to alleviate worries within their own Republican ranks, the chairmen of the House and Senate budget committees presented $2.2 trillion budgets that eventually wipe out deficits. But the numbers rely on ambitious, some say unrealistic, expectations. The Senate budget calls for spending to grow at less than the rate of inflation from 2008 to 2013. The House is even more rigorous, requiring cuts in mandatory spending such as Medicare, to reach balance in 2010.

Meanwhile, neither budget provides any money to cover the costs of military action in Iraq. The White House and the Pentagon have refused to provide Congress with any estimates about the cost of the war or the post-war reconstruction of Iraq.

Sen. Chuck Hagel, R-Neb., a prominent voice on foreign policy in the Senate, erupted last week after the Bush administration canceled a senior official's appearance before the Senate Foreign Relations Committee to discuss postwar reconstruction.

"We all pushed (administration officials) to give us some sense of this," Hagel said of lawmakers' war cost questions. "No answers. The administration chose not to have witnesses today. No answers. The president was asked at his news conference the other night. No answers. That does not encourage a great amount of trust and cooperation."

Under the Senate plan, the budget would reach a top deficit of $330 billion next year and then begin a gradual decline.

The Heritage Foundation analysis concludes that the economic activity created by Bush's tax cut would result in added revenues and reduce the cost of the tax cut by more than 50 percent, substantially reducing its effect on deficits.

But critics argue that without factoring war costs, any deficit projection is useless.

What's more, they say, these deficits may be more damaging than the deficits of the 1980s and early 1990s because they come as the population is aging, placing greater demands on government spending and dragging economic growth.

"You create a lost decade," said Van Doorn Ooms, a senior economist with the Committee for Economic Development, a non-partisan policy group made up of business leaders and educators. "We've lost our preparation for this demographic transition."