Bush Proposes Budget With $400B Deficit

US President George W. Bush 2007/9/20 AP

The spiraling growth of Medicare and the high cost of renewing President Bush's tax cuts are squeezing popular education, health, housing and anti-poverty programs in the budget blueprint that he hands lawmakers Monday.

Even with difficult-to-digest proposals to curb Medicare costs and kill programs to repair dilapidated public housing, fund community action agencies and provide food to the elderly poor, Mr. Bush's $3 trillion budget will project deficits around $400 billion this year and next.

Mr. Bush's submission is already absorbing brickbats from Democrats castigating him for inheriting a government in surplus and leaving Washington with a budget deficit that is likely to break the $413 billion record set four years ago, once war bills and the cost of giving the economy a fiscal jolt with tax rebate checks are factored in.

"The next president is going to inherit a colossal mess because of the fiscal irresponsibility of this president," Sen. Kent Conrad, D-N.D., chairman of the Budget Committee said Saturday.

Mr. Bush's budget will demonstrate a way to produce balance in four years and still renew tax cuts on income, investments and people inheriting large estates - cuts now scheduled to expire at the end of 2010. The cost of renewing those tax cuts exceeds $300 billion by 2013, according to congressional scorekeepers.

But he'll only be able to predict that balance by cutting spending in ways that Congress - whether controlled by Republicans or Democrats - has rejected many times before. After his proposal to kill or significantly cut 141 programs to save $12 billion was rejected by Congress last year, Mr. Bush is upping the ante by 50 percent with an even more controversial plan. And his bid to squeeze $178 billion from Medicare over five years has no chance on Capitol Hill, even though the program would still grow by 5 percent a year under his proposal.

Despite a worsening deficit picture, caused in large part by slumping tax revenues as the economy sours, Congress is likely to take no action this year to reverse the tide. No one likes to take painful steps to reduce federal spending in a presidential election year, and lawmakers typically don't defer to unpopular, lame duck presidents.

"This will be a placeholder year," Conrad said. "That's the reality."

While the Bush budget will receive a dead-on-arrival reception from lawmakers and be overshadowed by Tuesday's presidential primaries, administration officials have been promoting its more appealing elements in recent days.

Funding for the State Children's Health Insurance Program, the subject of an intense battle with Democrats last year, would increase by almost $20 billion over the next five years. An additional $6 billion is requested to finish a massive project to protect New Orleans from flooding. And the Food and Drug Administration would get a larger-than-average budget increase to send FDA staff overseas to inspect food and drugs imported into the United States.

Mr. Bush also backs $2 billion over three years to help get cleaner and more efficient energy technology to big polluters like India and China.

Other details the administration might not be as eager to promote have been leaking out from a variety of sources with particular knowledge about specific areas of the budget and from some budget planning documents seen in advance.

When the full document is out Monday, the full wrath of interest groups will be felt. Hospitals and other health care providers are already protesting cuts to Medicare and the Medicaid health care program for the poor and disabled, while advocates for the poor vow to again reverse huge cuts to social services block grants to states and funding for nonprofit groups that help the poor.

Affected industries can be counted on to protest user fees, even those as small as a 50-cents-per-flight ticket tax to finance screening machines for the Transportation Security Administration that are intended to detect explosives being smuggled aboard airplanes.

The Bush forecast for a balanced budget by 2012 also is likely to strike many as unrealistic, depending as it does on the assumption that there will be no additional no war costs for Afghanistan or Iraq after a $70 billion infusion for next year.

The White House budget also does not account for the huge cost of preventing the alternative minimum tax from hitting millions and millions of upper middle-class taxpayers after 2009. The White House and congressional Republicans blasted House Democrats as raising taxes for trying to offset AMT relief by closing a loophole on offshore tax havens; Bush's budget effectively assumes AMT relief after a one-year "patch" for next year is financed by tax increases elsewhere.

Elsewhere, cuts in the Bush budget would eliminate a $302 million program that gives grants to children's hospitals to subsidize medical education. A $300 million program for public health improvement projects would be eliminated, while grants to improve health care in rural areas would be cut by 87 percent.

The Centers for Disease Control's budget would face a 7 percent reduction of $433 million. The budget for a program to treat and monitor the health of first responders and others exposed to toxins at the World Trade Center after the Sept. 11 attacks would be cut by 77 percent, from $108 million this year to $25 million in 2009.

The National Institutes of Health, which funds health research grants, would see its budget frozen at $29.5 billion.

At A Glance:

President Bush on Monday will release a $3 trillion budget for 2009. Here is a look at some of its elements:

DEFICITS: The plan will claim deficits in the $400 billion range for this year and next. For the 2009 budget year covered by the Bush plan, deficits are likely to rise higher than Mr. Bush predicts after additional war costs are added in.

DEFENSE: The Pentagon would get a $35 billion increase to $515 billion for core programs, about 7 percent, with war costs additional. Another $21 billion would go to the Energy Department for nuclear weapons programs. A $70 billion "bridge fund" for the wars in Iraq and Afghanistan would give the next president time to consider options, with tens of billions of dollars more needed regardless of any strategy shift.

DOMESTIC APPROPRIATIONS: These would be essentially frozen at current levels, with most services being cut after inflation and population growth are factored in.

HOMELAND SECURITY: Overall, the budget for homeland security programs will increase by almost 11 percent, with a 19 percent increase for border security and immigration enforcement efforts, including new money to secure the border with Mexico.

MEDICARE AND MEDICAID: The programs will see almost $200 billion in cuts over the next five years, about three times the savings proposed last year but rejected by Congress. Much of the savings would come from freezing reimbursement rates for most health care providers for three years and from cutting payments to hospitals serving large numbers of the uninsured poor.

HEALTH: Health and Human Services Department funding would be cut by $2 billion, amounting to a 3 percent reduction. Funding for the National Institutes of Health would be frozen. The Food and Drug Administration would receive a 6 percent boost to $2.4 billion to ramp up food and drug safety efforts.

EDUCATION: Education programs would be frozen at $60 billion, with no increase to keep pace with inflation. Bush is pushing to restore $600 million lawmakers cut from Reading First, which serves low-income children. Title I grants, the main source of federal funding for poor students, would rise about 3 percent. Special education would receive $11.3 billion, a $330 million increase.
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