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Possible war, deficits cloud budget debate in Congress

Size of Bush tax cuts at stake

Size of Bush tax cuts at stake

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WASHINGTON (Reuters) -- The Republican-led Congress, facing record deficits and the unknown costs of an imminent war with Iraq, begins a battle this week to pass a tight federal budget that still makes room for big tax cuts requested by President Bush.

Democrats and Republican moderates in the closely divided Senate, which took up its 2004 spending blueprint Monday, want to shrink Bush's $726 billion tax cut package by more than half, to about $350 billion.

Congressional analysts estimate Bush's tax and spending policies would cost the government $2.7 trillion over the next decade, generating budget deficits every single year and turning an $890 billion surplus into a $1.82 trillion deficit.

In the House, which is due to begin debating its own plan Wednesday, moderate Republicans are loudly protesting deep spending reductions proposed to try to balance the budget while still paying for the tax cuts.

The House plan would essentially freeze nondefense spending in 2004 and require $470 billion in spending cuts over the next decade to government programs like the Medicare and Medicaid health insurance ones for the elderly and poor.

The budget debate is also being complicated by the prospect of a war with Iraq that could begin within days.

Lawmakers from both parties have criticized the administration for refusing to provide estimates of the costs of a war and its aftermath. A number have even suggested Congress should delay any decisions on next year's fiscal priorities until the scale of those costs are clearer.

War worries

The Pentagon last month floated a war cost estimate, later dismissed by the White House, of about $100 billion. That could rise to well over $200 billion if U.S. forces must occupy Iraq for several years, Senate Democratic analysts say.

Republicans say new tax cuts will help jolt the economy, boost government revenue and eventually shrink the deficits.

"I think it's vitally important that we do grow the economy," said Senate Budget Committee Chairman Don Nickles, an Oklahoma Republican. "I don't really think that doing nothing is satisfactory."

Democrats argue it was Bush's last tax cut in 2001 that started the steep recent slide in the U.S. fiscal position. They say new tax cuts will dig the deficit hole deeper and are irresponsible on the brink of what could be a costly war.

"If Congress were to actually adopt the plan before us, it would plunge the country off a fiscal cliff," said North Dakota Sen. Kent Conrad, the Budget Committee's top Democrat. "How can we call on our troops to be willing to make the ultimate sacrifice but ask for no sacrifice here at home?"

Both the Senate and House Republican budget plans predict deficits of over $320 billion in 2004 -- easily eclipsing the previous 1992 record of $290 billion.

The Senate plan assumes a total deficit over the next decade of $1.35 trillion. Even taking into account the substantial spending cuts it contemplates, the House plan would still generate a cumulative shortfall of $760 billion.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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