Skip to main content /POLITICS

On The Scene

Suzanne Malveaux: Bush's 'pinata'

From Suzanne Malveaux
CNN Washington Bureau

WASHINGTON (CNN) -- "They should just call me pinata," laments Mitch Daniels, the White House's money man. "I think some people in this town think that if they knock my head off, all the goodies will fall out."

Daniels, the director of the Bush administration's Office of Management and Budget, is only half-kidding. It's been that kind of day. In Room 450 of the Old Executive Office Building, Daniels stands before a bank of cameras and several dozen reporters with two brightly colored charts propped on easels. He is explaining why after five years of budget surpluses, there is now a deficit -- one much bigger than he initially expected.

The $165 billion deficit projected for fiscal 2002 -- $59 billion more than Daniels' office forecast in February -- is big turnaround from the 2001 fiscal year's $127 billion surplus.

The Bush administration attributes the country's financial woes in large part to the new costs associated with aftermath of the September 11 terrorist attacks -- homeland security and supporting the war on terror. But Friday, Daniels confirmed publicly what many administration officials worry about quietly: That the slumping economy is taking its toll on national revenues.

Daniels said because of declines in the stock market, there has been a sharp reduction in capital gains tax revenues. And his report reveals the economic downturn has erased two-thirds of the projected 10-year surplus.

But Daniels' message was hopeful: It turns out his office grossly underestimated the economy's ability to rebound. The OMB's economic growth projection for 2002 is 2.6 percent, not the 0.7 percent he forecast in February. He credits Bush's $1.3 trillion, 10-year tax cut, which Congress passed last year, and the economic stimulus plan passed in February.

In fact, Daniels is so optimistic, he says his mid-session budget review shows the budget will go from red to black by the 2005 fiscal year. But only if the country meets what he calls "the three big ifs:" if the economy continues sustained growth, if there are no unforeseen tragedies related to the war and if growth in government spending outside defense and homeland security can be restrained to 2 percent. Typically, government spending has grown by 8 percent over the last 10 years.

The deficit has re-ignited the debate between Democrats and Republicans over tax cuts and spending. But Daniels' office did dodge one political hot potato -- "dynamic scoring," the controversial methodology that factors in revenue generated from tax cuts that some believe inflates the budget numbers. Daniels said his department didn't use the formula because it was being "as conservative as they could be."

For Daniels, the budget deficit dust-up was the calmer half of the day. Earlier, he got slammed by members of Congress angered by his call for further cuts in an appropriations bill. But what else can you expect for a day in the life of a pinata?




Back to the top