Image: 2007 budget
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President Bush's budget is handed out at the Senate Budget Committee on Capitol Hill on Monday. The proposal calls for Bush's first-term tax cuts to be made permanent.
updated 2/6/2006 8:57:35 PM ET 2006-02-07T01:57:35

President Bush sent Congress a $2.77 trillion budget plan Monday that would make his first-term tax cuts permanent while reducing government-funded programs to deal with exploding budget deficits. Almost a third of the 141 targeted programs are in education.

The plan also calls for an increase in spending on the war against terrorism and a squeeze on Medicare funds.

“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 budget blueprint sharply decreases funding for supporting the arts, vocational education, parent resource centers and drug-free schools, and instead puts a heavy emphasis on keeping the country strong militarily. It maps out a way to make first-term tax cuts permanent at a cost of $1.4 trillion over 10 years, and still achieve Bush’s goal of cutting the deficit in half by 2009.

Achieving these goals constrained Bush’s efforts to offer new initiatives, although he did put forward a few mostly modest programs to deal with American anxieties about global competition, soaring energy costs and skyrocketing medical bills.

Bush’s spending proposals, contained in four massive volumes featuring green and beige covers, are for the 2007 budget year that begins next Oct. 1. The $2.77 trillion in spending would be up by 2.3 percent from projected spending of $2.71 trillion this year.

All-time-high deficit
The administration in its budget documents said the deficit for this year will soar to an all-time high of $423 billion, reflecting increased outlays for the Iraq war and hurricane relief.

But the administration says the deficits will be on a declining path over the next five years, which would allow the president to achieve his goal of cutting the deficit in half by 2009, the year he leaves office. However, the deficit of $354 billion that the administration is projecting for 2007 probably will be higher because the budget at present contains only $50 billion in spending for Iraq, White House Budget Director Joshua Bolten told reporters.

Bush is also seeking savings by trimming the growth of spending in Medicare, the government’s giant health care program for the elderly and disabled, by $35.9 billion over five years. The reductions, which are certain to face stiff opposition in Congress, would among other things reduce inflation adjustments for hospitals, nursing homes, home health care providers and hospices.

“These are not cuts,” Bolten said of Bush’s Medicare plans. “These are modest reductions in the rate of growth.”

Democrats attacked what they said were Bush’s skewed priorities. They said he was trying to impose austere budgets that will harm programs for the poor while protecting tax cuts Democrats said were going primarily to the wealthy.

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Democrats point to war cost
They also charged that Bush was understating future budget deficits by leaving out major items such as the true costs of the Iraq war and a long-term fix to keep the alternative minimum tax from hitting more middle-class taxpayers.

“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, the top Democrat on the Senate Budget Committee. “The result will be more debt passed on to our children.”

Senate Minority Leader Harry Reid, D-Nev., said that the budget was “filled with pages of giveaways to special interests and cuts to those who can least afford it.”

Responding, presidential spokesman Scott McClellan said, “The president is focused on making sure that we keep our economy growing, and that means keeping taxes low.”

Republicans in Congress expressed support for the spending document, which will kick off months of debate likely to last until the next budget year begins in October and perhaps beyond.

“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,” said Senate Budget Committee Chairman Judd Gregg, R-N.H.

In addition to trimming Medicare, other proposed Bush savings in so-called mandatory spending, because the payments are set in law for all who are eligible, include $4.99 billion in changes in farm commodity programs and $16.7 billion in reforms of the Pension Benefit Guaranty Corp., the government program that backs private pensions.

Money for drilling?
Bush’s budget also projects receiving $4 billion over the next five years for drilling in the Arctic National Wildlife Refuge, something Congress has repeatedly refused to allow.

The biggest spending increase would go to the military, a 6.9 percent rise to $439.3 billion for 2007, a figure that does not include the costs of fighting wars in Iraq and Afghanistan. The administration said last week it will ask Congress for an additional $120 billion to cover fighting for the rest of this year and the early part of 2007 while seeking $18 billion more in hurricane relief this year.

While the Department of Homeland Security would also see an increase for 2007, nine of the 15 Cabinet agencies would see outright cuts in their discretionary spending for next year with the biggest percentage reductions occurring in the departments of Transportation, Justice and Agriculture.

$14.5 billion reduction in 141 programs
Bush is proposing to continue a serious squeeze on the one-sixth of the budget outside of defense and homeland security that is subject to annual appropriations. This year he would cut spending in this area by 0.5 percent.

To achieve this goal, Bush is seeking savings of $14.5 billion by eliminating and drastically scaling back 141 government programs. Last year, he targeted 154 such programs and won two-fifths of the spending cuts he requested, amounting to $6.5 billion in savings.

Even programs not targeted for elimination are subject to tight budgets, including previously favored agencies such as the National Institutes of Health, which would see its spending essentially frozen at this year’s level.

Robert Eckel, president of the American Heart Association, said that it was a disappointment for the 71 million Americans who suffer from heart disease, stroke and other cardiovascular disease that Bush’s budget has placed funding for programs “that help prevent, treat and cure these diseases on the back burner of his domestic agenda.”

Medicare cuts controversial
Bush’s proposed Medicare reductions are expected to draw determined opposition in Congress, which just approved a package of $39 billion in cuts in benefit programs over five years, including $6.4 billion in reductions in the growth of Medicare and $4.7 billion in cuts in the growth of Medicaid, the joint state-federal program that provides health care to the poor.

The spending plan does contain some winners in the domestic arena.

Set for higher spending, as highlighted in Bush’s State of the Union address, are programs to address soaring energy costs through development of alternative fuels, rising medical bills through expanded health savings accounts and global competition through a new “American Competitiveness Initiative.”

That initiative would extend an expired business tax break for research and development, double the government’s commitment to basic scientific research and train thousands of new science and math teachers.

Instead of pushing last year’s Social Security overhaul proposal, the president is calling for creation of a bipartisan commission to study ways to deal with soaring spending for Social Security, Medicare and Medicaid. However, his budget does include a projection that creation of private investment accounts for younger workers, the heart of his plan, would cost $712 billion over the next decade.

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