Budget Battle Brewing

The White House likely will come under intense pressure to trim substantial tax cuts proposed in President Bush's budget, despite efforts by Republicans to capitalize on their new majority power in Congress.

The administration can be expected to find resistance to these cuts unless it supports a boost in spending in areas favored by Democrats in the closely divided House and Senate.

Mr. Bush's $2.23 trillion spending plan for the 2004 budget year that begins Oct. 1 proposes $1.3 trillion in tax cuts over 10 years, increased spending for defense and homeland security and record budget deficits.

Democrats charged that Mr. Bush was shortchanging critical government needs in order to provide more tax cuts to the wealthy.

"Priority after priority is being sacrificed at the expense of President Bush's unfair, unaffordable and ineffective tax cuts," said Sen. Joe Lieberman, D-Conn., one of five potential Democratic presidential rivals who attacked the plan.

Members of the president's economic team, including White House Budget Director Mitch Daniels and newly sworn-in Treasury Secretary John Snow, were headed to Capitol Hill on Tuesday to begin their efforts to win votes for the proposal.

House Republicans for the most part applauded the budget, saying they agreed with Mr. Bush's assessment that the tax cuts are needed to jump-start a weak economy and that the deficits will melt away once the country returns to stronger economic growth.

"The president's budget lays a sound framework for expanded security, economic strength and victory over the forces of terrorist tyranny," said House Majority Leader Tom DeLay, R-Texas.

But some Republicans in the Senate, where the GOP has a thin two-vote majority, were more guarded.

Sen. Charles Grassley, chairman of the Senate Finance Committee, said he was focused on finding "tax policies that can deliver the most immediate bang for the buck." Grassley has openly questioned whether he can round up enough votes for the centerpiece of Bush's economic stimulus proposal, eliminating individual taxes on stock dividends.

Mr. Bush's budget included the $670 billion in tax cuts over 10 years he first unveiled in January as an economic stimulus program, but the proposal has now grown to $695 billion. Treasury added $25 billion to the original $360 billion price tag for the dividend measure, after re-estimating of the program's cost over a decade.

Mr. Bush's budget also includes $588 billion in other tax relief, including making permanent the 2001 tax cuts, due to expire after 2010.

Mr. Bush blamed the deficits on the 2001 recession and the war on terrorism and insisted in his budget message to Congress that the best way to get back to a balanced budget was to boost economic growth through further tax cuts.

One item certain to get extra scrutiny after Saturday's loss of the space shuttle Columbia was Mr. Bush's proposal to provide NASA with a modest 3 percent increase — to $15.5 billion for the fiscal year that begins next Oct. 1, including a 4.7 percent increase for the shuttle program.

Less than two years after Mr. Bush projected $5.6 trillion in surpluses for the next decade, on Monday he estimated $1.08 trillion in cumulative deficits for the coming five years alone.

The budget mostly projected five years ahead instead of the customary 10 years. Administration officials said longer forecasts are guesswork, while Democrats said Bush did not want to reveal the full, bleak impact of his budget policies.

The president called for setting aside $400 billion over the next decade for revamping Medicare, the health insurance program for 41 million elderly and disabled people, including adding prescription drug coverage.

Mr. Bush proposed to give states more latitude in spending federal funds for Medicaid, which provides health coverage for the poor, and for Head Start preschools in low-income neighborhoods.

Marian Wright Edelman, president of the Children's Defense Fund, accused the administration of "waging a budget war against poor children."

The president would spend $782 billion next year for the operations of all federal agencies, excluding the two-thirds of the budget that covers automatic benefits like Social Security. That is $30 billion, or 4 percent, more than Bush has so far sought in the bills for this year that lawmakers are still writing.

Of that, half would be for the Pentagon, giving it a 4.2 percent increase over this year, to $380 billion. The new Department of Homeland Security would grow to $26.7 billion, $1.3 billion more than its component agencies are on course to get this year.