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News Analysis

Bush: Cut programs, increase defense spending
by Mary Deibel
Scripps Howard News Service


February 07, 2005

Washington - The $2.57 trillion budget that President Bush sent Congress Monday would hike defense and homeland security spending and make deep cuts in popular domestic programs from veterans' care and farm aid to education and environmental protection.

The proposal also recommends new tax cuts for health care, savings and charitable giving on top of permanent passage of previous Bush tax cuts.

Whether the budget stanches the record deficits run up on Bush's watch depends on how you count.

Bush calls it a "lean" budget that "takes a hard look at programs that have not succeeded or shown progress."

House Speaker Dennis Hastert, R-Ill., considers it "a good starting point for Congress" that "reflects the tough fiscal challenges."

House Democratic leader Nancy Pelosi of California calls it "a hoax on the American people (when) the two issues that dominated the president's State of the Union address - Iraq and Social Security - are nowhere to be found."

Bush's budget continues the buildup in the global war on terror, with the Pentagon scoring a 4.8 percent increase to $419 billion for the new fiscal year that starts Oct. 1, while homeland security gets a 7 percent raise to $34.2 billion.

Otherwise, discretionary spending is cut 1 percent after inflation, with 150 programs gutted or killed. Still, conservatives outside government complained that Bush "isn't serious about cutting spending," said Chris Edwards, an analyst with the conservative Cato Institute. "The fine print shows that these cuts only reduce 2006 spending by 0.8 percent":

  • Federal education dollars for literacy, vocational education and anti-drug programs account for 1 in 3 programs taking big hits.
  • Twelve of 23 federal agencies would see budget cuts, including 11.5 percent at Housing and Urban Development, 9.6 percent at Agriculture, 6.7 percent at Transportation and 5.6 percent at the Environmental Protection Agency.
  • Amtrak passenger rail service and the Army Corps of Engineers dam-and-flood control program, both popular with Congress, are drastically downsized.
  • The $4.7-billion-a-year community development block grant program would die. Its funding would be combined with 18 other programs into a $3.7 billion distressed-community development plan. "Unreasonable," complains the U.S. Conference of Mayors.
  • Veterans would pay more for prescription drugs, and high-income vets without service-connected illness or injury would pay a $250 annual VA health care fee.
  • The federal-state Medicaid insurance program for low-income families would pressure states to cut $45 billion over 10 years.

The Bush budget excludes big-ticket items the administration wants including another $81 billion for Iraq and Afghanistan.

Social Security private accounts Bush seeks aren't included either. He postponed the start until 2009, when they would require $754 billion for the first five years.

Bush budget director Josh Bolten said the administration will soon make a supplemental request for Iraq and Afghanistan, but he said including further money for those operations would only be budget guesswork.

Bolten also said that, even if startup costs for Social Security private accounts were included, the president would still meet his goal of halving the deficit by 2009 as a percentage of the total economy.

Critics charge the Bush Social Security plan was put off to 2009 so costs are minimal in the five-year budget window the White House now uses instead of traditional 10-year forecasts.

Bush achieves his promise to halve the deficit by 2009 through fuzzy math, critics complain, because he doesn't start with the 2004 deficit of $412 billion but with the inflated $521 billion estimate his budget office highballed that year. Thus Bush reaches a deficit of $251 billion in 2008, or half that inflated amount, a year early instead of the $206 billion deficit that is half the 2004 shortfall.

"Bush's budget does not realistically cut the deficit in half by 2009," said the Cato Institute's Edwards.

Meanwhile, the federal debt would soar from $8 trillion this year to $11 trillion by 2010.

Permanent passage of Bush's cuts in income tax rates and investment taxes, plus repeal of federal inheritance taxes, will cost an estimated $1.1 trillion through 2015.

Bush also proposed new tax credits for low-income families that buy health-care policies and for people who use tax-free Health Savings Accounts. He would let taxpayers withdraw money without penalty from individual retirement accounts for charitable contributions. And he would replace a host of retirement and education savings plans with tax-favored Lifetime Savings, Retirement Savings and Employer Retirement Savings accounts, which would let a family of four, in theory, set aside $114,000 a year.

Bush's budget doesn't fix the Alternative Minimum Tax, a parallel income tax intended to make sure the very rich pay a little. Because it has never been adjusted for inflation, it will hit 1 in 3 households by 2010 if nothing is done. Correcting it carries a $600 billion, 10-year price tag.


E-mail Mary Deibel at DeibelM(at)
Distributed by Scripps Howard News Service

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