Politics

What To Cut, What To Keep

By CBSNews.com staff CBSNews.com staff

February 25, 2001 / 9:50 PM EST / CBS

President Bush plans to reduce corporate "subsidies" to help pay for tax cuts and higher education and health spending, his budget chief said Sunday.

As Mr. Bush prepares to outline his budget plan to Congress on Tuesday, one likely target is the U.S. Export-Import Bank, said Mitch Daniels, director of the Office of Management and Budget. The bank guarantees loans to foreign companies in projects that use U.S. products and services.

Also targeted are federal programs that bring telephone service to rural areas, said Daniels on Fox News Sunday.

"There will definitely be some restraint and even some, yes, cuts in terms of government's involvement and subsidy of corporations," he said, citing government assistance for research and investments.

The administration is taking aim at programs it sees as duplicative, he said. "We have 50 programs for the homeless sprawling across eight departments of government," Daniels said on CNN's Late Edition.

"Those are not particularly the ones I am looking at here, but we have to be careful with duplication of that kind," he said.

CBS News Correspondent Diana Olick reports Mr. Bush's budget speech is expected to include discussion of one of his administration's most controversial proposals: drilling for oil in Alaskan wildlife refuge areas that are now off-limits.

For days, Mr. Bush has outlined proposed spending increases for popular programs, including education, Medicare and health research.

CBS News Correspondent John Roberts reports the budget's also expected to include more than $300 billion for defense, cash which may be spent a little differently than in the past, to allow the military to adjust to changing strategic needs.

The president is at the same time proposing a 10-year, $1.6 trillion tax cut. And Daniels pledged the Bush administration would "pay down all the (national) debt that is available to be paid down."

Sen. John Kerry, D-Mass., said that President Bush's plan to proceed with his tax cut was his "first significant mistake."

"There's going to be an enormous battle" in Congress, Kerry said on NBC's "Meet the Press." He insisted the Bush budget would not allow both the tax cut and necessary government spending.

The White House has said little about where Bush would cut spending to finance this agenda.

President Bush will propose holding next year's overall discretionary spending to 4 percent growth - a bit more than inflation, and less than the average 6 percent increases in each of the last three years of the Clinton administration.

To achieve that 4 percent average after boosting certain spending, President Bush must trim elsewhere.

Daniels said Mr. Bush's budget would increase federal spending by more than $25 billion. But, he said, some departments' spending must be "slowed down this year in order to make room" for Bush priorities.

"We started a progam decades ago to bring telephones to rural America," he said. "It's still there, although everybody's got a telephone."

The federal government distributes more than $2 billion a year to make local phone service affordable for customers in rural and other high-cost areas.

The lion's share of that comes not from taxpayer money, but from assessments on consumers' bills. The government administers the programs.

The Export-Import Bank provided $12.6 billion in loans, guarantees and credit insurance to help boost overseas sales of U.S. goods in the last fiscal year. Asked whether it was among the programs to be cut, Daniels said, "That could be."

Several prominent business groups, pointing to last week's report of a record trade deficit, already have protested the likely cuts to the bank. Word of the reductions began leaking several days ago.

But by trimming the corporate "subsidies," the Republican president is showing he will stand up to a key benefactor. The move could also help insulate him from Democratic charges that his tax plan is tilted to the rich.

Many businesses strongly backed President Bush in his campaign last year, and some have been seeking corporate tax cuts. Bush has resisted the idea.

On the contrary, Daniels made clear that the White House is taking aim at what consumer advocates call "corporate welfare."

Daniels' spokeswoman, Claire Buchan, declined to elaborate on his comments, saying the administration would in coming days identify which programs are being targeted.

Democratic critics have warned that Mr. Bush's 10-year tax cut is based on unreliable long-term economic forecasts, a point Daniels partially conceded Sunday. "Odds are these projections will not be accurate; Precision is tough 10 years out," he said.

But, he said, the president's long-term plan is based on "very cautious assumptions."

Democrats and some moderate Republicans have embraced the idea of a "trigger" that would permit future tax cuts only if specified surplus or debt-reduction targets are met.

Daniels firmly rejected the idea, calling it "flawed conceptually and mechanically impossible."

Mr. Bush presents the outlines of his plan Tuesday night in an address to Congress.

On Wednesday and Thursday, he embarks on a two-day swing through Pennsylvania, Iowa, Arkansas and Georgia to build support for his plan.