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Monday, 23 September, 2002, 18:47 GMT 19:47 UK
Bush warns Congress over budget
George W Bush
Lawmakers need to keep their budget plans tight, Bush says
US President George W Bush has warned Congress not to use a delay in setting the national budget as an excuse for extra spending.

As often happens in election years in the US, the 13 spending bills needed every year to fund the federal government have yet to pass, a situation which during the Clinton years sometimes caused the government literally to shut down.

Instead, Congress will probably use a temporary bill to keep spending at current levels once the new fiscal year starts on 1 October, allowing legislators to head off on the campaign trail ahead of 5 November elections.

But Mr Bush cautioned them that using the delay as an opportunity to pack in extra pork-barrel spending could seriously damage the economy.

"If Congress overspends it's going to be a problem fror making America's economy continue to grow," he told an audience at a National Guard base in New Jersey.

"My message to Congress is remember whose money you're spending. Congress must be wise with your money."

Deficit finance

Some Democrats may find this rather cheeky, given the fact that the federal budget is back in deficit and is likely to stay that way for the foreseeable future.

They and a number of independent studies blame the $1.35 trillion tax giveaway Mr Bush instigated for the situation, while Republicans insist it is the weak economy which is causing the damage.

In theoretical terms, Mr Bush's concern stems from the view that government spending can boost the deficit, which in turn encourages higher interest rates and slows down private spending.

The theory is a classic laissez-faire one, and contrasts with other views - notably that when private investment is tight, as is the case in the US despite rock-bottom interest rates, then public spending can plug the gap and pump-prime the economy.

Whichever is true, the fact remains that US growth was a torpid 1.1% in the three months from April to June.

Anything that could shove the US back into the recession it experienced last year is a concern for Mr Bush, not least because his Republican party is fighting to regain the Senate and avoid losing the House of Representatives.

Head to head

With growth stagnant, economic data ambiguous at best and stocks sliding to six-year lows, the campaign is likely to focus heavily on economic issues.

The Republicans will blame the Clinton administration for creating an unsustainable boom while trying to draw attention away from corporate scandals - many involving companies close to the party.

But critics may decide to flag up the new national security doctrine Mr Bush is now espousing, which demands America remain the pre-eminent military power on the globe as well as approving pre-emptive strikes on the country's enemies, real and potential.

That, critics say, is effectively handing the military and the defence industries a blank cheque at a time when everything else is facing straitened times.

Economic indicators

Fears and hopes

US Fed decisons

See also:

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