[iwar] [fc:Bush.Says.War.on.Terror.Justifies.Deficit.Spending]

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Date: 2002-01-08 07:50:27


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Date: Tue, 8 Jan 2002 07:50:27 -0800 (PST)
Subject: [iwar] [fc:Bush.Says.War.on.Terror.Justifies.Deficit.Spending]
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Bush Says War on Terror Justifies Deficit Spending

By Arshad Mohammed

WASHINGTON (Reuters) - President Bush on Monday said the U.S. government may
run a deficit next year but said this was justified to win the war on
terrorism, protect the homeland and pull the economy out of recession.

Joined by Federal Reserve Board Chairman Alan Greenspan and by the
administration's top economic advisors, Bush made his first order of
business after his 12-day vacation discussing the U.S. economy, which slid
into recession last year.

The president said he was optimistic the economy would fare better this year
and said the key question he wanted to ask Greenspan, who rarely appears in
public at the White House, and his advisors was how to create jobs.

``We're making good progress on winning the war in Afghanistan and we've got
to make good progress about helping people find work,'' Bush told reporters
in the Cabinet Room, with Greenspan sitting directly across from him.

Opinion polls reflect strong support for Bush's conduct of the war on
terrorism after the Sept. 11 attacks but show an undercurrent of anxiety
about the weak U.S. economy.

Democrats, solidly behind Bush in his war against terrorism, see him as
vulnerable for his response to economic woes at a time when U.S.
unemployment is still rising, hitting 5.8 percent -- its highest since April
1995 -- last month.

Bush promised to put forward some sort of stimulus plan in his budget
proposal, which is expected to be made public on Feb. 4, and he said he did
not flinch at the prospect of running a deficit.

``I said to the American people that this nation might have to run deficits
in time of war, in times of a national emergency or in times of a recession.
And we're still at all three,'' Bush said.

``I have no problem figuring out ways to win the war, figure out ways to
protect the homeland -- and those will be the priorities of my budget ...
and at the same time recognizing that we may not balance the budget for this
year,'' he added.

BIPARTISANSHIP IN JEOPARDY

A spirit of bipartisan harmony triggered by the Sept. 11 attacks was in
jeopardy as Republicans and Democrats began to position themselves for
mid-term elections in November, and the weak economy was shaping up as a key
battleground.

After a 12-day respite at his Texas ranch, the first item on Bush's agenda
was meeting with Greenspan, who last year gave his blessing to tax cuts,
helping the president get his landmark $1.35 trillion tax reduction through
Congress.

That tax cut is now under fire from Senate Majority Leader Tom Daschle, a
South Dakota Democrat who on Friday called it the root cause of the
economy's deterioration and blamed it for the return of federal budget
deficits.

Bush has been forced to defend the tax cuts, saying on Saturday that taxes
would be raised ``over my dead body.''

``It makes sense to spend money necessary to win the war. It makes sense to
spend money necessary to protect the homeland. And we're in a recession,''
Bush said on Monday. ``There is some talk about raising taxes. ... That
would be a disaster, to raise taxes in the midst of a recession.''

The president said he expected the U.S. economy to fare better this year
than last, when it slipped into recession in the spring and slowed further
after the shock of the Sept. 11 attacks on New York and Washington.

``I'm optimistic that 2002 is going to be a better year than 2001,'' Bush
told reporters, Bush declined to comment on whether he thought additional
interest rate cuts by the Federal Reserve would help pull the U.S. economy
out of recession.

``In terms of monetary policy, I will leave that in the hands of our
chairman, Chairman Greenspan,'' Bush said. ``He has done a fabulous job in
running the Federal Reserve ... for that America should be grateful.''

Greenspan's appearance before the cameras at the White House was a rarity
for the Fed chairman, who jealously guards his independence.

Bush thanked him for coming ``to offer his independent advice and counsel
about the state of our economy'' and he barred reporters from asking
Greenspan questions, saying: ''otherwise he won't come back to the White
House.'' 

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