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The federal government currently faces significant budget challenges. A recession, an attack on America, and a war have led to a dramatic and unforseen deterioration in tax revenues, large spending increases, and the return of budget deficits. Revenues have fallen by nearly 9 percent over the last two years, and continue to underperform in early 2003. Meanwhile, spending grew by 12 percent over the same period. According to the Congressional Budget Office, the federal government would have recorded a budget deficit in 2002 even if the 107th Congress had never enacted a single spending increase or tax cut. The Committee believes these trends are neither acceptable, nor sustainable.
To address these issues, the Committee-reported Congressional Budget Resolution for fiscal year 2004 invests in our economy and reestablishes enforceable limits on federal spending. The resolution reflects President George W. Bush's proposals to address critical national priorities now, while seeking to reduce federal budget deficits over time as the economy grows stronger and we address threats abroad. Reducing Budget Deficits
The Committee-reported resolution increases deficits in the near term as we invest in the economy and fight the war against terrorism. Deficits would then gradually fall over the ten-year budget window before showing a small surplus in 2013. Stronger economic growth, or lower levels of spending, would balance the budget even
Relative to the size of the economy, deficits under the Committee-reported resolution would hit a high of 2.9 percent in 2004, and decline every year thereafter. Debt held by the Public would decline over the ten year period from 37 percent in 2004 to 29.5 percent in 2013, far below the post-World War II average of 41.5 percent. Creating and Sustaining Economic Growth
Clearly Congress cannot ignore our struggling economy and the associated loss of jobs. Our response must be immediate, of significant size to impact a $10.8 trillion economy, and create both shortand long-term incentives for economic growth.
The Committee-reported resolution provides $698 billion from 2003 to 2013 to the Senate Committee on Finance for economic growth and job creation tax relief. The Finance Committee is directed to produce a reconciliation bill for this purpose.
The Committee believes the President has shown tremendous leadership on this issue by proposing an aggressive mix of tax relief designed to let families keep more of the money they earn, encourage investment by small businesses, and eliminate the taxcode's bias against corporate dividends.
The amount provided to the Finance Committee is sufficient to accommodate the President's proposals to accelerate marginal income tax rate cuts, accelerate marriage penalty relief, increase the child tax credit, eliminate the double-taxation of dividends, and increase small business expensing limits. Since the budget resolution cannot dictate specific tax policy changes, these or other tax incentives may ultimately be included in the legislation.
The Committee notes that an analysis by the Center for Data Analysis at the Heritage Foundation using the DRI-WEFA U.S. macroeconomic model showed substantial economic benefits from the President's growth proposals, including: (1) More Jobs: 997,000 new jobs in 2004, and an annual average of 837,000 new jobs from 2004 through 2013; (2) Stronger Growth: $84 billion higher GDP in 2004, and an annual average of $69 billion in additional GDP from 2004 through 2013; (3) Higher Income: $178 billion in additional disposable income in 2004, and an annual average of $120 billion in additional disposable income from 2004 through 2013; and (4) Lower Deficits: The net "cost" of the President's proposals fall by