Bush says deficit doesn't merit tax hikes

STERLING, Va. -- Offering a sneak preview of his economic State of the Union, President Bush said Thursday that budget deficits do not justify tax increases.

"The best way to solve the deficit is to grow the economy, not run up your taxes," Bush told a friendly crowd, saying he would again press Congress to make his tax cuts permanent.

The White House Office of Management and Budget projected last week that the federal budget deficit will climb back above $400 billion when Bush proposes his annual budget in February. The OMB blamed the cost of Gulf Coast hurricane recovery.

Robert Bixby, executive director of the nonpartisan Concord Coalition, a group that advocates a balanced budget, called it inconsistent for Bush to push permanent tax cuts when he is responsible for such major expenses as the Iraq war and the new Medicare drug benefit.

"There's no connection between the administration's tax policies and its spending policies," Bixby said.

Speaking at a family-run moving and storage firm, Bush cracked jokes during a 74-minute presentation that included a question-and- answer session.

When a man complaining of traffic congestion said, "We don't get to use helicopters," Bush replied, "I won't in three years, either."

Bush, preparing to deliver his State of the Union speech on Jan. 31, used the event to sound some of his economic themes. He said he would ask Congress to expand tax-free health savings accounts to make them "more attractive, more portable, more individualized."

He discussed his continuing efforts to limit lawsuit liability and restrict federal spending.

Bush said he has not given up on the main topic of last year's State of the Union: changes to Social Security that include individual investment accounts. Congress balked, but Bush said something would have to be done to ensure solvency of the two major entitlement programs, Social Security and Medicare.

"No matter how hard it may seem for some, I'm going to keep talking about it," he said.

Bush has spent weeks talking up the growing economy, crediting his first-term tax cuts. With some cuts due to expire in coming years, Bush said he would make renewing them a major goal.

"Failure to make tax relief permanent is a tax raise on the working people and the small businesses in this country," Bush said.

Taking questions, the president made some political news. When a woman asked whether first lady Laura Bush would follow her predecessor Hillary Rodham Clinton, in running for the Senate, Bush quickly answered, "Never."

He added, "I'm pretty certain when I married her, she didn't like politics or politicians."

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