President George W. Bush has vowed to slash the federal deficit in half by 2009 by controlling spending and by promoting fiscal policies, such as tax cuts, that he says will spur economic growth.

"The best way to address the deficit and move toward a balanced budget is to encourage economic growth -- and to show some spending discipline in Washington, D.C. We must work together to fund only our most important priorities," President Bush said in his 2003 State of the Union speech.

The president also said he plans to work with Congress to set spending priorities that focus on domestic and international security. In his 2004 State of the Union speech, he called on Congress to limit the growth of discretionary spending -- that is spending on programs funded by annual appropriations bills -- by 4 percent in order to reduce the deficit.

The president acknowledges the size of the federal deficit has grown substantially during his administration, but attributes the record deficit to the economic recession that started in January 2000 before his inauguration and the increase of military and security spending in the wake of the Sept. 11, 2001 attacks.

Under these circumstances, the president has argued, running a deficit is necessary and a sound fiscal policy. "As a matter of fact, we increased expenses, particularly (for) ... the military. If I put somebody in harm's way, they're going to get the best, as far as I'm concerned," Mr. Bush said in a March 2004 speech, where he defended the budget increases to bolster national security and to prepare for the war on terrorism and in Iraq.

Treasury Secretary John Snow maintains the president's tax cuts represent a key part of the nation's deficit reduction strategy, saying: "Making the tax cuts permanent is an important part of deficit reduction because lower taxes have stimulated our economy so effectively. A growing economy leads to increased Treasury receipts, and when combined with restrained spending, deficits can be shrunk."

To reach the deficit reduction goals, President Bush proposes:

- Holding discretionary spending growth below 4 percent, and spending unrelated to defense and security, below 1 percent growth;

- Offsetting increases in mandatory spending by reduction of mandatory spending;

- Reinstating caps on discretionary spending until 2009;

-Making tax cuts permanent to spur economic growth, leading to increased Treasury tax revenues.

Bush 2004: The President Discusses Economic Priorities

Sen. John Kerry, D-Mass., has pledged to restore financial discipline in order to promote future economic growth and stability. Kerry advocates a smaller government, proposing spending caps across the board except in the areas of security, education, health care and Social Security.

Kerry has warned the deficits stand to become "a fiscal cancer that will erode any recovery and threaten the prospect of lasting prosperity" and destroy the solvency of Social Security, Medicare, placing an "enormous burden" on future generations.

The Democratic contender has criticized President Bush for moving the federal budget "from record surpluses to record deficits" and for "excessive spending and ineffective tax giveaways for the wealthiest Americans." Kerry also challenged President Bush's state spending plan, saying it "has left states with nearly $90 million in budget deficits," prompting lay offs, education cuts, and nonfederal tax increases.

At an April 7 speech, Kerry said as president he would cut the deficit in half in four years by rolling back the Bush administration's tax cuts "for the wealthiest Americans while expanding tax cuts for the middle class."

To reduce the budget deficits, the Massachusetts senator proposes several measures to balance budgets and ensure fiscal discipline:

-Create a 'State Tax Relief and Education Fund' to alleviate the severe budget shortfalls experienced by many states. The new fund would help struggling states "with an additional $25 billion to prevent education budget cuts, tuition increases, and tax and fee raising" that Kerry says hinders overall economic and job growth;

- Roll back the Bush administration's tax cuts, including dividend tax cuts, for people earning more than $200,000;

- Push through legislation he co-authored with Sen. John McCain, R-Ariz., creating a commission designed to eliminate corporate welfare and other pork barrel spending projects by Congress;

- Reduce size of the federal government, curtail government spending to level of the gross domestic product (GDP) as that during the Clinton administration, lower the number of political appointees and ban bonuses for appointees;

- Renew Congress' budget enforcement rules requiring any new spending and tax cuts to be offset with other spending cuts;

- Authorize the president with power of line-item veto of excessive, wasteful spending in the budget and then submit the list for congressional approval.

Kerry 2004: John Kerry's Framework to cut the deficit in half

Budget of the United States Government, Fiscal Year 2005 contains the Budget Message of the President, information on the President’s budget and management priorities, and budget overviews organized by agency, including assessments of their performance.
-- U.S. Office of Management & Budget

The Congressional Budget Office's budget projections give the Congress a baseline against which to measure the effects of proposed changes in tax and spending laws. The projections start with the Congress's most recent budgetary decisions and show what would happen to the federal budget if no policy changes were made over the projection period.
-- Congressional Budget Office