Bush's $3 trillion budget is US first

Business Materials 4 February 2008 04:56 (UTC +04:00)
Bush's $3 trillion budget is US first

( AP ) - In the nation's first-ever $3 trillion budget, President Bush seeks to seal his legacy of promoting a strong defense to fight terrorism and tax cuts to spur the economy. Democrats, who control Congress, are pledging fierce opposition to Bush's final spending plan - perhaps even until the next president takes office.

The 2009 spending plan sent to Congress on Monday will project huge budget deficits, around $400 billion for this year and next and more than double the 2007 deficit of $163 billion. But even those estimates could prove too low given the rapidly weakening economy and the total costs of the wars in Iraq and Afghanistan, which Bush does not include in his request for the budget year beginning Oct. 1.

Last year, when Democrats were newly in the majority, there were drawn-out veto struggles. This year's fights could be worse because it is an election year.

As in past years, Bush's biggest proposed increases are in national security. Defense spending is projected to rise by about 7 percent to $515 billion and homeland security money by almost 11 percent, with a big gain for border security. Details on the budget were obtained through interviews with administration officials, who spoke on condition of anonymity until the budget's release.

The bulk of government programs for which Congress sets annual spending levels would remain essentially frozen at current levels. The president does shower extra money on some favored programs in education and to bolster inspections of imported food.

Bush's spending proposal would achieve sizable savings by slowing the growth in the major health programs - Medicare for retirees and Medicaid for the poor. There the president will be asking for almost $200 billion in cuts over five years, about three times the savings he proposed last year.

There is no indication Congress is more inclined to go along with this year's bigger cuts; savings would come by freezing payment rates for most health-care providers for three years.

In advance, Democrats attacked the plan as a continuation of failed policies that have seen the national debt explode under Bush; projected surpluses of $5.6 trillion wiped out; and huge deficits take their place, reflecting weaker revenues from the 2001 recession, the terrorism fight, and, Democrats contend, Bush's costly $1.3 trillion first-term tax cuts.

"This administration is going to hand the next president a fiscal meltdown," Senate Budget Committee Chairman Kent Conrad, D-N.D., said Sunday in an interview with The Associated Press. "This is a budget that sticks it to the middle class, comforts the wealthy and has a set of priorities that are not the priorities of the American people."

Bush's budget reflects the outlines of a $145 billion stimulus plan that the president is urging Congress to pass quickly to combat the growing threat of a recession.

While the House passed a stimulus bill close to the president's outline, Senate Democrats are trying to expand the measure to include cash relief for older people and extended unemployment benefits.

Bush's five-year blueprint makes his first-term tax cuts permanent while still claiming to get the budget into balance by 2012, three years after he leaves office.

Republicans are pledging to protect those first-term tax cuts. But Democrats, including the party's presidential candidates, want to retain the tax cuts that benefit lower and middle-income taxpayers while rolling back the tax cuts for the wealthy.

Democrats say Bush's budget is built on flawed math. Beyond 2009, the budget plan does not include any money to keep the alternative minimum tax, which was aimed at the wealthy, from ensnaring millions of middle-income people. It also includes only $70 billion to fight the wars in Iraq and Afghanistan in 2009, just a fraction of the $200 billion they are expected to cost this year.

Reflecting strong lobbying by Secretary of State Condoleezza Rice, Bush's budget includes a request to hire nearly 1,100 new diplomats to address severe staffing shortages and put the State Department on track to meet an ambitious call to double its size over the next decade.

In a change from last year, the administration is also seeking to increase spending on the State Children's Health Insurance Program by $19.7 billion over the next five years. That request is midway between the $5 billion increase requested by Bush last year and the $35 billion increase in bills passed by Congress but vetoed by Bush in October and December.

Bush also proposes boosting spending in some areas of education such as Title I grants, the main source of federal support for poor students. But at the same time, Bush seeks to eliminate 47 other education programs that are seen as unnecessary including programs to encourage art in the schools, bring low-income students on trips to Washington and provide mental health services.

Deficits in the range of $400 billion would be very close to the all-time high imbalance, in dollar terms, of $413 billion set in 2004 during Bush's first term. Many private economists are forecasting that the deficits this year and next will surpass the 2004 record in large part because they believe the country is heading into a recession.

Stanley Collender , a budget expert with Qorvis Communications, a Washington consulting firm, said it is very likely that the next budget year will begin with the government operating on a short-term spending measure. In that scenario, Democrats, unable to enact their spending priorities over Bush's vetoes, would mark their time hoping the country will elect a Democrat to succeed Bush.

The $3 trillion Bush's proposes spending in 2009 would be the first time that milestone has been reached. Bush also presided over the first budget to hit $2 trillion, in 2002. It took the government nearly 200 years to reach the first $1 trillion budget, which occurred in 1987 during the Reagan administration.