The economic outlook of the White House budget director

Washington - In the midst of a budget clash between Congress and the White House, Office of Management and Budget Director Jim Nussle offered a note of caution on how an economic slowdown could affect government finances at a Monitor-sponsored breakfast Wednesday.

Mr. Nussle spoke to reporters the day after what The Washington Post called "a full-scale battle" broke out in Washington on federal budget issues. The tussle began Tuesday when President Bush vetoed the $606 billion health and education spending bill, which is a top priority for Democrats. In discussing his sixth veto, the president charged the Democratic majority with acting "like a teenager with a new credit card."

Later the same day, Senate majority leader Harry Reid (D) of Nevada said Congress will not authorize additional funds for the war in Iraq without a commitment by Mr. Bush to begin bringing the troops home. The House and Senate were slated to act this week on legislation that would provide $50 billion in war funding and set a goal of ending combat by December 2008. Senator Reid said that if Bush vetoes the measure, "then the president won't get his $50 billion."

"Hopefully just bluster is what I would call what Reid said," Nussle told reporters. "I hope that is all it is and not a serious leadership or legislative position. I hope that the bluster is because he is getting a lot of … blowback from the far left here. But it doesn't answer the question of how are you going to responsibly fund that which we have asked our men and women to do in harm's way."

Nussle also was critical of a report by the Democratic staff of the Joint Economic Committee, which said the wars in Iraq and Afghanistan had cost the country $1.5 trillion – nearly double the $804 billion the White House has spent or requested for the wars through 2008. The study cited the conflicts' "hidden costs" – including higher oil prices, the expense of treating wounded veterans, and interest payments on the money borrowed to pay for the wars. It also said that the conflicts are pulling reservists and National Guardsmen away from their jobs, resulting in economic disruptions for US employers that the report estimates at $1 billion to $2 billion.

"Unfortunately, what the Joint Economic Committee did, it was used for unfortunately partisan or PR purposes," Nussle said. "The Democrats are having a difficult time right now managing their own caucus vis-à-vis the war funding.... Unfortunately, [on Tuesday] they haven't had any or at least not a lot of recent bad news with regard to the war, and so they decided to manufacture some bad news on their own."

There has been a fair amount of sobering news on the economy lately. Last week, Federal Reserve Chairman Ben Bernanke said the US economy will slow "noticeably" in the final three months of the year. And this week, Augustine Faucher, an economist with Moody's Economy.com, told the Associated Press that he expected the federal budget deficit for the current budget year to rise to about $200 billion.

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