San Diego Union Tribune

February 7, 2006

Bush budget blueprint adds muscle to military
$2.77 trillion proposal tough on social programs

By Finlay Lewis and Otto Kreisher

WASHINGTON – President Bush set the stage yesterday for an election-year struggle on Capitol Hill by proposing a $2.77 trillion budget for next year that would boost spending for the war on terror while asking nervous lawmakers to squeeze popular domestic programs such as Medicare and food stamps.

Seeking a delicate balance between beefing up the nation's security and constraining the escalating deficit, Bush made a pitch to boost military spending next year by 7 percent, while cracking down on mandatory social safety-net programs that are expected to drain the Treasury over the next two decades in the absence of congressional intervention.

Bush's complex budgetary blueprint for the fiscal year that begins Oct. 1 appears destined to sharpen political combat in Congress. Among the more provocative items are his demands that the temporary tax cuts enacted earlier in his presidency be made permanent and that Congress save nearly $15 billion by killing or sharply cutting 141 domestic initiatives that are subject to annual renewal at discretion of Congress and the White House.

Senate Minority Leader Harry Reid, D-Nev., denounced the budget as “immoral and irresponsible,” saying that it “continues to put special interests first” at a time when lobbying scandals on Capitol Hill have exposed what he termed a “Republican culture of corruption.”

With federal revenues next year expected to amount to about $2.4 trillion, administration budget writers said they expect a deficit of $354 billion, down from a projected $423 billion deficit for the current fiscal year. Their projections for subsequent years show continuing improvements in the government's finances and are consistent with Bush's 2004 pledge to cut the deficit in half by the time he leaves office.

In his message to Congress accompanying the budget, Bush linked the achievement of that goal to his insistence that tax cuts enacted during his first term not be allowed to expire on schedule in 2008 and 2010.

Budget at a glance

A summary of President Bush's proposed 2007 $2.77 trillion budget:

Receipts $2.4 trillion

Deficit $354 billion

Defense spending $439.3 billion

Discretionary spending $1.029 trillion

Mandatory spending $1.494 trillion

Departmental cuts (in percentages)

Transportation 9.4

Justice 7.2

Agriculture 6.5

Education 3.8

Environmental Protection Agency 4
“With a growing economy, tax receipts are on the rise, helping to bring down the deficit,” Bush said. “To stay on track to meet my goal of cutting the deficit in half by 2009, we must maintain our pro-growth policies and insist on spending restraint.”

Previously, the White House estimated the cost to the Treasury of making the 2001 and 2003 tax cuts permanent – including reductions in taxes on capital gains and dividends, and a law reducing marginal tax rates on individuals – would be $1.4 trillion over the next 10 years.

The cost of taking that step would swamp the estimated 10-year savings of $172 billion from slowing the rate of growth in entitlement programs. The biggest savings under the president's budget in social safety-net savings would come from slowing Medicare's rate of growth by $36 billion over five years. Medicaid and the State Children's Health Insurance Program are targeted for savings of $4.9 billion, also through steps aimed at slowing their growth. Food stamp eligibility would be restricted by $706 million.

“We've seen this playbook before,” said Sen. Kent Conrad of North Dakota, the ranking Democrat on the Senate Budget Committee. “Every year, the Bush administration talks about fiscal responsibility, but in the end its policies dig us deeper into deficit and debt.”

But Sen. Judd Gregg, R-N.H., chairman of the committee, said, “We have to face up to this fiscal reality that this baby-boom generation is going to retire soon, and we need to do something about it.”

In a briefing, Joshua Bolten, the White House budget chief, pointed to nearly three years of payroll gains and declining unemployment, saying, “This economic growth would not have been possible without the tax relief signed by the president.”

Pointing to a growth in government receipts of 14.5 percent last year , Bolten added, “A strong economy is the most important factor in reducing the deficit.”

With the nation engaged in what Pentagon officials now are calling “a long war” against Muslim extremists and global terrorists, the Defense Department would see its allocation boosted to $439.3 billion. That would be an increase from $410.8 billion this year.

But neither of those figures represents the true cost of Pentagon operations.

Congress already has provided $50 billion in extra funding outside the regular budget to cover the cost of the global war on terror, with most of it for operations in Iraq and Afghanistan. And the Pentagon comptroller, Tina Brown, said the department later this month will send Congress a request for about $70 billion more to cover those operations and to repair or replace equipment and weapons being destroyed or worn out.

This proposed budget also starts funding for a significant transformation in military capabilities to meet the new national security challenges facing the nation in the 21st century.

In addition to boosting military spending, Bush proposed an 8 percent increase in nonmilitary outlays for bolstering domestic security, as he put forward a budget of $35.6 billion next year for the Department of Homeland Security.

Taking aim at overseas economic competition from rising powers such as India and China, Bush pushed an American Competitiveness Initiative, unveiled last week in the State of the Union speech. It would cost about $5.9 billion next year. The bulk of the funding would finance tax breaks for research and development, but funds would also be allocated to lure new math and science teachers into accelerated programs for high school students.

Fleshing out another promise from last week's address – this one aimed at ending the nation's “addiction” to imported oil – Bush proposed a 22 percent boost in funding for research into renewable energy sources, including solar, wind and nuclear power.

Among the losers, Bush proposed departmental budget cuts of 9.4 percent for Transportation, 7.2 percent for Justice, 6.5 percent for Agriculture and 3.8 percent for Education. The Army Corps of Engineers would take an 11.2 percent hit, while the Environmental Protection Agency would see its budget trimmed by 4 percent.

Overall, Bush called on Congress to hold overall spending on all programs subject to its annual discretionary spending decisions to below the inflation rate.

For initiatives in this category that have no national security component, he said he would like to see spending reduced to below this year's levels. Spending in this category accounts for about one-sixth of the total budget.

He also asked Congress to set aside $2.6 billion as a medical science bulwark against a new pandemic, such as a global outbreak of bird flu.

After having fought a pitched battle two years ago in enacting an administration plan to introduce private sector competition into administering Medicare's new prescription drug benefit, Bush's plan for Medicare savings is certain to stir partisan passions. Among other things, his proposal would reduce inflation adjustments for hospitals, nursing homes, home health care providers and hospices.

In the briefing, Bolten declared, “These are modest reductions in the rate of growth, and we believe they can be done without undermining the support that these programs were intended to provide.”

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