The Bush budget: What's in $2.9 trillion?

President Bush's new proposed budget represents an attempt to make permanent some of his key changes in US domestic policy, while challenging the fiscal priorities of the new Democratic- controlled Congress.

What it may not represent is an easy pathway to the land of black ink. While the White House plan projects a balanced budget by 2012, some of its assumptions about future government spending are unrealistic, say some budget analysts.

In essence, the Bush budget may promise a budgetary nirvana in the future, while avoiding some of the messy details about the way that nirvana might be reached.

"They're trying to get you to focus on 2012 instead of 2008," says Stan Collender, a veteran federal budget expert and managing director of Qorvis Communications.

The release of the massive amount of paperwork that represents the executive branch's proposed budget for the coming fiscal year is a much anticipated annual event in official Washington, like the appearance of Punxsutawney Phil on Groundhog Day, or the March return of the swallows to San Juan Capistrano in California.

A president's opponents routinely deride his budget as dead on arrival. Despite this, months of congressional hearings on its details follow. In the end, much of the plan will provide a blueprint for the day-to-day operations of many federal departments and agencies.

It is the top lines of total spending and receipts, plus key budgetary assumptions, that can prove controversial. In this, President Bush's proposal for fiscal 2008 is no exception.

"I doubt that Democrats will support this budget, and frankly, I will be surprised if Republicans rally around it either," said House Budget Committee Chairman John Spratt (D) of South Carolina, in a statement after the plan's release.

Mr. Bush's plan calls for $2.9 trillion in 2008 spending. It would make permanent his first-term tax cuts – reductions that, at this point, may well represent Bush's signature change in domestic policy.

Military spending would represent the government's largest area of growth. The Bush proposal calls for a Pentagon budget of $624.6 billion for fiscal 2008, up from $600.3 billion in 2007. Included is an estimated cost of $141.7 billion for fighting in Iraq and Afghanistan – the first time war costs have been wrapped into the annual budget instead of dealt with separately in supplemental appropriations.

The $141.7 billion may not represent the final spending figure for Iraq and Afghanistan, however. And the budget's longer-term projections include just $50 billion in war costs for fiscal 2009, and zero after that.

Considering the nature of wars, it is "very, very difficult to project costs in future years," said White House spokesman Tony Fratto on Monday.

Healthcare spending, by contrast, represents one of the budget plan's primary areas of restraint. The White House would squeeze $66 billion in savings from Medicare, the health insurance program for seniors, over the next five years, primarily by slowing the rate of growth of payments to healthcare providers. In addition, some $12 billion would be pared from Medicaid, the federal program for the indigent.

In addition, US government outlays for domestic discretionary spending – a category that includes everything from the FBI to the Food and Drug Administration – would be held to 1 percent growth, before inflation. Because costs are likely to rise more than 1 percent over the next year, this cap represents a cut, in real terms.

Republicans in Congress say that, overall, Bush showed fiscal responsibility with his plan, and that if the new Democratic majority on Capitol Hill were serious about balancing the budget, it should work with the White House, not criticize it.

"If they want to show they can govern, the path has been laid for them to control spending," said the ranking GOP member of the House Budget Committee, Rep. Paul Ryan (R) of Wisconsin, in a phone interview with reporters.

Critics of the Bush plan, however, say it is notable for what it excluded. For one, the White House made no serious attempt to pencil in post-2008 war costs, says Mr. Collender of Qorvis.

Nor did it include the cost of changing the Alternative Minimum Tax (AMT), a levy aimed at the wealthy that increasingly hits middle-class taxpayers. An AMT change is anticipated by lawmakers of both parties.

"Proposals that provide long-term savings are fully included in the Bush budget," says Collender. "Proposals that provide long-term increases [in spending], like the Iraq war or an AMT change, are not included."

Under assumptions that the Concord Coalition, a budget watchdog group, considers more plausible, Uncle Sam will remain $400 billion in the red in 2012. These assumptions include discretionary spending that keeps up with the increase in the gross domestic product, and a continuation of other current policies.

Material from wire services was used in this report.

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