Bush proposes balanced US budget by 2012

Jan 3, 2007, 16:42 GMT

Washington - President George W Bush proposed Wednesday to balance the US federal budget by 2012 and urged Democrats who won control of Congress in November to work with him.

Bush's attempt to reach out across the nation's political divide came a day before members of a new House of Representatives and Senate - both no longer dominated by his Republican Party - are sworn in.

'I'm hopeful that Republicans and Democrats can find common ground to serve our folks, to do our jobs, to be constructive for our country,' Bush said at the White House after his first cabinet meeting of 2007.

He said he would hand lawmakers a five-year budget plan next month that calls for a balanced budget by 2012, reversing a ballooning gap due largely to tax cuts and US-led wars in Afghanistan and Iraq.

The budget would restrain spending and set priorities, notably the fight against terrorism, 'the need to maintain a strong defence' and a call for making his administration's tax breaks permanent, Bush said.

Fiscal restraint will position the US to tackle reforms of cash- strapped federal social programmes, including retirement benefits and health care for the poor and elderly, he said.

While aimed returning the US to the balanced budget it had under his Democratic predecessor Bill Clinton, Bush's plan contains seeds of conflict because many Democrats oppose making his tax cuts permanent.

Bush says the tax cuts have been critical to spurring US economic growth. Critics argue they have benefited rich Americans the most.