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War tax sought as Congress debates Bush budget
By Richard Cowan
February , 2007

WASHINGTON (Reuters) - An outspoken supporter of the Iraq war on Tuesday called for a new tax to pay for its astronomical cost as Congress opened a debate on President George W. Bush's $2.9 trillion budget plan for next year.

Sen. Joseph Lieberman of Connecticut proposed a "war on terrorism tax" at a Senate hearing during which he said the Pentagon's $622 billion defense budget proposal for fiscal 2008 threatened to crowd out funds for domestic programs.

The lawmaker, a former Democrat turned independent, favors a U.S. troop buildup in Iraq.

Bush traveled to Manassas, Virginia, to deliver the opposite message about the budget he submitted to the Democrat-controlled Congress on Monday.

"This budget can work if Congress resists the temptation to raise your taxes," the Republican president told employees of Micron Technology Inc., a semiconductor manufacturer.

As the wars in Iraq and Afghanistan grind on and their costs could hit $662 billion by the end of next year, Congress is becoming increasingly worried about cutting domestic programs to keep wartime budget deficits down.

Even moderate Republicans have rebelled against tight budgets for social programs, saying last year they had been "cut to the bone and into the marrow."

House of Representatives and Senate budget panels want to produce their own spending plans within the next few months.

"I think we have to start thinking about a war on terrorism tax," Lieberman said during a Senate Armed Services Committee hearing on Bush's defense budget. "I mean, people keep saying we're not asking a sacrifice of anybody but our military in this war and some civilians who are working on it."

Lieberman did not provide details of his tax idea.


Bush's budget proposal also faced skepticism among Democrats on the House Budget Committee.

"We find the results that you claim unconvincing," Chairman John Spratt, a South Carolina Democrat, told Bush budget director Rob Portman.

Spratt said Bush's plan projects a $61 billion budget surplus in 2012 while assuming only $50 billion in war costs in 2009 and none after that. This year, fighting wars in Iraq and Afghanistan could total around $170 billion.

Bush's budget also does not factor in permanently fixing a quirk in the U.S. tax code so that middle-class taxpayers do not get hit with tax bills designed for the wealthy. The fix could cost around $1 trillion.  

"We have good news for the American people," Portman told the committee. "The president's 2008 budget reduces the deficit every year and balances the budget by 2012, while meeting our nation's priorities."

Rep. Marion Berry, an Arkansas Democrat, responded, "My first thought is, if we're doing so good, how come we're so broke?"

U.S. debt has risen $3 trillion since Bush took office in 2001. That debt skyrocketed following an economic slowdown that began in late 2000 and Bush tax cuts amid huge increases in spending for government-run health programs, the military and domestic security after September 11.

House Ways and Means Committee Chairman Charles Rangel said Bush needs to reach out to Democrats if he wants to accomplish a budget that deals with politically explosive issues like Social Security, Medicare and Medicaid.

"I don't think that I can tell the president what to put on the table and what not to put on the table but I can tell him don't pick a damn fight," Rangel told reporters.

Washington politicians were not the only ones attacking Bush's budget, which would allow domestic discretionary spending to grow by only 1 percent, below the rate of inflation.

California Gov. Arnold Schwarzenegger, a Republican, said his state would be hurt by plans to transfer some health care costs to the poor from the federal government to state governments. He also said it was unacceptable to eliminate federal reimbursements for costs of jailing illegal immigrants.

(additional reporting by Kirsten Roberts, Donna Smith and Caren Bohan)

© Reuters 2007. All Rights Reserved.

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