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Bush’s budget headaches

By
February 7, 2006

President Bush sent his GOP allies in Congress an austere budget for next year that is filled with political land mines and flush with difficult choices.

The document unveiled Monday clamps down on domestic programs favored by lawmakers and calls for politically perilous curbs to Medicare that promise to bog down in a Congress already poisoned by election-year politics.

“It’s a heavy lift,” said Senate Budget Committee Chairman Judd Gregg, R-N.H. “There’s no question it’s going to be a challenge.”

Despite the sacrifices called for in education, Amtrak, community development and local law enforcement grants, health research, and many other programs frozen or cut under his plan, Bush’s $2.77 trillion blueprint forecasts a record $423 billion deficit for the current year and improves upon that figure in 2007 largely by lowballing cost estimates for the war in Iraq.

Bush gives a generous 6.9 percent budget increase to the Pentagon _ which would receive a record $439 billion before accounting for the wars in Iraq and Afghanistan _ and wants Congress to pass a $3 billion or 14 percent increase in foreign aid.

His proposal projects $70 billion in new funds to execute the war in Iraq through the end of September, which will come in a detailed request later this month and bring total war funding for 2006 to $120 billion. Another $50 billion is allocated for next year.

“My administration has focused the nation’s resources on our highest priority _ protecting our citizens and our homeland,” Bush said in his budget message.

The White House also said that it will request another $18 billion or so in hurricane relief in the next few days.

At the same time, Bush proposes to kill or dramatically slash 141 programs for savings of almost $15 billion. Congress is likely to reject many of the cuts, such as a proposal to kill the Commodity Supplemental Food Program, which provides food aid to the very poor.

Moderate Republicans such as Sen. Arlen Specter of Pennsylvania and Olympia Snowe of Maine recoiled at cuts to social programs, while farm state conservatives blasted cuts in crop payments. Specter said proposals for education and health spending were “scandalous.”

Major initiatives like making Bush’s landmark tax cuts permanent and providing $52 billion in health care tax breaks through 2011 face challenges of their own. Every year, Bush has called for making his 2001 and 2003 tax cuts permanent. Congress has yet to do so.

Most of Bush’s tax cuts expire in 2010. Extending them would cost $120 billion in 2011 and $1.2 trillion from 2012-2016.

The White House credits Bush’s tax cuts for fueling economic growth and surging revenues despite high fuel prices, last year’s devastating hurricanes and the recession and terrorist attacks of 2001.

“Those tax cuts are essential toward sustaining the good economic growth we have now,” said White House Budget Director Joshua Bolten. “The most important thing we can do with our federal budget is keep a good, strong, growing economy that’s generating jobs.”

The budget plan projects deficits on a downward trajectory, especially when measured against the size of the economy and meets, at least on paper, Bush’s 2004 promise to cut the deficit in half. That year Bush projected a $521 billion deficit and promised to cut that in half by 2009.

Bush projects a 2009 deficit of $208 billion, but that depends on Congress accepting all of his spending cut proposals. His budget also leaves out the long-term costs of occupying Iraq and Afghanistan, which are impossible to predict with certainty.

With the increases for the Pentagon, this year’s Iraq and Afghanistan war costs, and new tax cuts for health care, the budget shows that deficits over the five years ending in 2011 would total nearly $1.2 trillion.

Democrats charged that the real picture is worse and that Bush was understating future deficits by leaving out major items such as the long-term costs of the Iraq war and permanently fixing the alternative minimum so it doesn’t hit more middle-class families.

“It explodes deficits, but then conceals them by providing only five years of numbers and leaving out large costs,” said Sen. Kent Conrad of North Dakota, senior Democrat on the Senate Budget Committee. “The result will be more debt passed on to our children.”

For mandatory programs providing fixed benefits such as Medicare, farm subsidies and Medicaid and whose spending rises each year as if on autopilot, Bush is proposing $65 billion in savings over the next five years, much of it from the rapidly growing Medicare program for the elderly.

The proposal would reduce spending on Medicare over the next five years by $36 billion, or less than 2 percent. Most of the reductions would come from smaller inflation adjustments for hospitals, nursing homes, home health care providers and hospices. Higher-income seniors would see increased premiums.

Bush’s Medicare plan largely follows the recommendations of a bipartisan Medicare advisory panel, but the cuts nonetheless generated howls of outrage from Democrats and industry groups.

“Hospitals already are stretching scarce resources to respond to the daily challenges of providing care to all who come through our doors,” said Dick Davidson, president of the American Hospital Association. “Cuts to these resources will have a negative impact on the availability of care for the patients and communities we serve.”

Congress already rejected many of Bush budget cut proposals when it sent him a $39 billion deficit cut package last week, but they showed up again in his 2007 blueprint. For example, Bush again asked for a 5 percent cut in crop payments to farmers and tighter eligibility for food stamps.

The president may find more success in tamping down domestic agency operating budgets that take up about one-sixth of the federal pie. Last year, Bush successfully forced Congress to narrowly cut such spending and his 2007 plan proposes a more than 1 percent cut in domestic agency operating budgets.

Those cuts are magnified since the budget proposes $3 billion in new fees next year to finance new spending elsewhere. Once again, better-off veterans are again being asked to make higher co-payments for prescription drugs and pay a new $250 annual enrollment fee for their medical care. Congress has rejected both three years in a row.

A new proposal to raise fees on some better-off military retirees enrolled in the Pentagon’s Tricare program isn’t likely to fare much better. Also back is a proposed new $5 fee on each way of air travel to pay $1.6 billion of the cost for airport screenings. That, too, was rejected by Congress last year.

© 2006 The Associated Press