Why Bush's budget will change its shape

His $3.1 trillion budget would be the largest ever.

Joshua Roberts/Reuters
Critical eyes: House Budget Committee chairman John Spratt (D) of South Carolina (c.), examining the Bush's budget with staffers, says it would lead to more deficits, debt, and cutbacks in services.
SOURCE: White House Office of Management and Budget/Rich Clabaugh–STAFF

When it comes to President Bush's new $3 trillion budget blueprint for 2009, one thing is almost certain: It's going to get changed. Probably a lot.

In part that's because events may intervene. The economy could be falling into recession, with unpredictable fiscal results. The Iraq and Afghanistan wars will probably cost far more than the $70 billion allotted them in Mr. Bush's plan.

But politics is the main reason why Uncle Sam's actual '09 spending and taxing policies will probably end up so differently from the way the president proposes. Bush is a lame duck, with less power to get his way. A new chief executive – be they Republican or Democratic – will have different policy priorities.

And a Democratic Congress is unlikely to rubber-stamp Bush's proposed increase in military spending and decrease in domestic programs.

"He's drawing a tougher line in the sand than most Democrats can deal with," says Stan Collender, a former congressional budget official who is now a managing director of Qorvis Communications.

The president's 2009 budget, released Monday, calls for $3.1 trillion in federal spending. That marks the first time a proposed budget has broken the $3 trillion mark. By way of contrast, Bush's first budget, way back in 2001, called for less than $2 trillion in outlays.

But falling tax receipts – particularly from corporations – and the expense of a proposed stimulus package for the economy will send the federal deficit soaring, according to the Bush outline. It will reach $410 billion in fiscal 2008, and $407 billion in fiscal '09, according to the Office of Management and Budget.

In 2007, the deficit was $162 billion.

Bush's budget does predict a return to government surpluses in 2012. In part, say critics, that is because it is counting on unrealistic reductions in spending on Medicare and Medicaid.

"Today's budget bears all the hallmarks of the Bush legacy – it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services," said Rep. John Spratt (D) of South Carolina, chairman of the House Budget Committee.

Bush defended his budget as a reflection of a commitment to fiscal responsibility and a strong defense.

The plan proposes getting rid of 151 programs that the White House deems ineffective. Of these, 47 are education initiatives, among them grants for career and technical education, elementary and secondary school counseling, and education for native Hawaiians. Military spending would rise to $515 billion for the Department of Defense's base budget. If Congress approves that figure, the military budget will have risen 74 percent during Bush's tenure, note Office of Management and Budget documents.

"Two key principles guided the development of my budget – keeping America safe and ensuring our continued prosperity," said Bush in his budget message to Congress. "As commander in chief, my highest priority is the security of the American people."

Bush's 2009 budget allots $70 billion for the costs of the fighting in Iraq and Afghanistan. Currently, those conflicts are costing far more than that on an annual basis, and that is unlikely to decrease in the short term – unless a new president pulls the plug and brings all US troops home as quickly as possible.

Nor does the Bush plan include any provision assuming that the middle class will be protected from the bite of the alternative minimum tax after this year. The Congressional Budget Office estimates that fixing this tax in 2012 would cost $118 billion, double Bush's projected surplus for that year.

"They've obviously played an inordinate number of games to try to make [the budget] look better," Sen. Judd Gregg (R) of New Hampshire, the top Republican on the Senate Budget Committee, told the Associated Press.

On entitlements – big spending programs such as Medicare that operate on automatic pilot, unless Congress passes legislation altering them – the administration is proposing moves that would save almost $200 billion, spread over five years. Such a trim would far surpass the $65 billion in similar cuts Bush requested last year.

Medicare would take the brunt of the entitlement cuts, losing $178 billion over the next five years, if the administration has its way.

But Medicare is getting bigger so fast that such a reduction would simply slow the rate of its growth, not actually make it smaller. The health-insurance program for the elderly would see its annual growth rate sliced to 5 percent, from 7.2 percent, under the administration's proposals.

Changing entitlements is difficult even in ideal political times. In a election year, it may be almost impossible, note analysts.

In addition, the bipartisan agreement on the need for a quick $150 billion stimulus package – without offsetting budget cuts or tax increases to pay for it – may make some lawmakers feel less need for fiscal restraint, for at least this year.

The stimulus deal may seem like a "get out of jail free card" for some lawmakers, says Mr. Collender of Qorvis, unleashing their inner spending impulses.

The stimulus bill does present some challenges in regards to the deficit, said Jim Nussle, Office of Management and Budget director, at a briefing Monday. But the current shortfall, measured as a percentage of the nation's gross domestic product, is in line with deficits experienced under Presidents Ronald Reagan and George H.W. Bush, according to the OMB chief. Despite the Bush tax cuts ­ which the 2009 budget assumes become permanent ­ revenues have stayed strong in recent years. They were up 11 percent in 2006 and 7 percent in 2007. It is spending that is the real problem, insisted Mr. Nussle ­ in particular, the mandatory spending of entitlements, which are growing so fast they might swallow all US government income by the middle of the century. "Current trends frankly are not sustainable," said Nussle.

Wire-service material was used.

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