The Bush administration's highest priority for its remaining three years is to control the growth of federal spending and bring down the US budget deficit, US treasury secretary John Snow has said.
"The clear priority of the administration right now is the deficit, making sure that we achieve the president's objective of cutting the deficit in half by the time he leaves office," he said.
This would put the deficit below 2 per cent of gross domestic product, low by historical standards.
"This administration knows that deficits matter," he added. "We know they're unwelcome."
Mr Snow also called on China to introduce greater currency flexibility by widening the trading band of the renminbi.
The declaration is the clearest signal yet of the areas of domestic agenda the administration intends to pursue hardest, as president Bush tries to recast his presidency after a disastrous year.
The US has pledged to cut the fiscal deficit and raise national savings as part of a global effort to rebalance trade flows.
Mr Bush began his second term with clear domestic priorities: reforming social security, making tax cuts permanent and initiating broader tax reform.
However, political opposition has thwarted his efforts on social security, and the Republican congress has been unable to push through permanent tax cuts.
When he came to office in 2001, the president inherited a projected 10-year surplus of $5,600 billion (€4,650 billion). However, tax cuts and growing spending for the military and homeland security have contributed to a sharp reversal, with the Congressional Budget Office (CBO) now predicting a $2,100 billion deficit over the next decade. The annual deficit has been falling, however, from $413 billion in the 2004 fiscal year to $316 billion this year, according to CBO figures.
Federal reserve chairman Alan Greenspan told congress yesterday there had been a "modest improvement" in the government's fiscal position. But he warned: "Lowering the deficit further in the near term, however, will be difficult in light of the need to pay for post-hurricane reconstruction and relief."
Mr Snow made it clear that, in spite of the focus on the deficit, the administration would not reconsider its low-tax policies, pointing out that strong growth was producing the highest tax revenues in US history, at more than $2,150 billion this year. "We have dealt with one of those important economic policy, philosophical and political issues: are low tax rates consistent with fiscally responsible behaviour? I think the answer is clearly 'Yes', as long as there's an intense focus on spending."
The administration's renewed attention on the deficit follows a rebellion by fiscal conservatives. - (Financial Times Service)
