 |
| The Budget |
October 17, 2005 |
| |
Dear Friends,
All of us worry about budget deficits and even more so after hurricanes Katrina and Rita. Let me share some thoughts.
We balanced the budget for the first time since 1969 and paid off 550 billion in public debt in 1998, 1999, 2000 and 2001. The week before 9/11 we were debating in the Congress what to do with a $300 billion surplus.
Then the world changed. We were fighting a war, recovering from a national emergency and in an economic slowdown all at once.
The worst thing to do when the economy is soft is to raise taxes. It just causes more people to lose their jobs. So, we had to continue to pursue policies that encourage economic growth and control the growth of government spending.
Last year, non-defense spending was flat. That means that when you take into account inflation, non-defense spending in the federal budget declined in real terms.
This year, we have not finished our negotiations with the Senate, but non-defense spending actually decraeses slightly this year.
Strong economic growth and controlling the growth of government spending is starting to work. At the beginning of this year, the Congressional Budget Office prediced a record deficit. But it didn`t happen. They kept adjusting their estimates all year and when the books closed on September 30, the deficit was $100 billion LESS than expected 12 months before. That`s a 25 percent reduction in the deficit in 12 months.
But what about Katrina? Some predictions.
First, the cost that will be paid by the federal government will be much less than some people have said. While the scope of the disaster is enormous, some Gulf state political leaders have overplayed their hand and lost a lot of credibility in Washington.
Second, assistance will take place over a longer period of time. There is no way that these states can possibly absorb the amount of aid some have requested.
Third, any reconstruction funds will be specifically appropriated, competitively bid, and overseen to prevent fraud and waste.
There is no need to rush this and more than enough reason to worry about fraud and waste.
We`ll watch the pennies so that we continue to make progress and return to a balanced budget with a strong economy and efficient federal programs.
Wish you were here,
 |
|
|
|