Bush proposes $2.77 trillion budget -
Monday, February 6, 2006 9:15:56 PM
afxpress.com
WASHINGTON (AFX) -- President Bush on Monday sent Congress a $2.77 trillion budget request that would boost defense spending, while trimming Medicare and other government programs even as first-term tax cuts are extended
The budget request seeks a 2.3% rise in total government spending in fiscal 2007, which begins Oct. 1. The deficit would total $354 billion
"As this budget shows, we have set clear priorities that meet the most pressing needs of the American people while addressing the long-term challenges that lie ahead," Bush wrote to lawmakers, in a letter accompanying the four-volume, 2,400-page document. "The 2007 budget will ensure that future generations of Americans have the opportunity to live in a nation that is more prosperous and more secure." Democrats criticized the budget outline as misleading and incomplete, complaining that it fails to adequately account for future war-related spending, efforts to shield middle-class taxpayers from the alternative minimum tax, and the long-term effects of extending Bush's first-term tax cuts
The White House, meanwhile, expects the government to end the current fiscal year with a deficit of $423 billion -- a record high in dollar terms
Administration officials say the deficit figure is less onerous when measured as a percentage of the overall economy
"While this increase in the deficit is unwelcome, at 3.2% of GDP, the projected deficit would be well within the historical range and smaller than the deficit in 11 of the last 25 years," White House Office of Management and Budget Director Joshua Bolten told reporters
The Bush plan "explodes deficits, but then conceals them by providing only five years of numbers and leaving out large costs, like long-term [AMT] reform and realistic ongoing war costs.?The result will be more debt passed on to our children," said Sen. Kent Conrad of North Dakota, the senior Democrat on the Senate Budget Committee
Defense boost As previously outlined by administration officials, the White House requested a Defense Department budget of $439.3 billion, up nearly 7% from the $410.8, excluding war-related supplemental spending, in fiscal 2006 outlays. The budget doesn't fully account for expected costs associated with the ongoing wars in Iraq and Afghanistan. White House officials last week said war-related supplemental spending would likely top $120 billion in the current fiscal year. They also added a $50 billion "plug number" to the fiscal 2007 estimate, which deputy OMB director Joel Kaplan said would allow the White House to better guess deficit figures
Outside of the Pentagon and other security-related spending, the White House targeted 141 programs for sharp cuts or elimination, in a bid to save $14.5 billion in fiscal 2007. Bush also seeks to cut projected spending on mandatory entitlement programs by $65 billion over five years, with the bulk coming from measures designed to hold down outlays for Medicare, the health-care program for the elderly, by $36 billion through 2011. Mandatory spending refers to programs such as Medicare, Medicaid and Social Security, in which outlays are set automatically according to the number of beneficiaries and other factors
The White House contends that such cuts will help the administration stay on target for reducing the budget deficit to less than 2.25% of gross domestic product by fiscal 2009
The White House expects the deficit to fall to $354 billion in fiscal 2007, and declining to $208 billion by fiscal 2009. The 2009 figure would be equivalent to 1.4% of GDP, the White House said, leaving Bush on track to meet his goal of cutting the deficit to less than 2.25% of GDP by that date
But budget watchers warned that the administration has a less-than-stellar record when it comes to its deficit projections
The Concord Coalition, a bipartisan group that advocates a balanced federal budget, warned that previous Bush administration budget forecasts have assumed similar improvements in the deficit outlook that have failed to materialize
The White House's 2004 budget, for example, projected a $307 billion shortfall that year declining to around $201 billion in fiscal 2006. Instead, the administration forecasts that red ink in 2006 will be more than twice that amount
Tax battle The administration's five-year forecast assumes that Congress will extend Bush's first-term tax cuts, which are due to expire in coming years
Critics charge that the tax cuts will exacerbate the deficit, while the administration argues that further tax relief will help ensure economic growth
"Many of the administration's critics will argue that we should let the tax relief expire," Bolten said.?"A tax increase is the wrong prescription, not only for the nation's economic health, but also for the government's fiscal health.?We are not an under-taxed society." Federal tax receipts declined for three consecutive years at the beginning of the Bush administration, bottoming out at $1.783 trillion in fiscal 2003, or 16.5% of GDP, and marking the first time receipts fell three years in a row since the 1920s
Tax receipts have bounced back strongly in the last two years amid strong economic growth, edging back up to around 17.5% of GDP in fiscal 2005. The administration forecasts receipts will increase 5.9% annually through 2011
[Total horseshit - We got a rebound because of a one time repatriation of overseas corporate profits. Watch what happens heading into a recession. Mish]
Budget analysts warn that efforts to trim federal spending, always a difficult task, will likely prove even more challenging ahead of the 2006 midterm elections
Bush attempted in last year's budget to eliminate or sharply curtail around 154 programs to eliminate $15.8 billion in spending. In the end, Congress agreed to less than half of the proposed cuts
What's more, the federal budget is set to explode in coming decades as the Baby Boom generation retires, fueling a sharp rise in what is known as entitlement spending, including Social Security, Medicare and Medicaid
But those programs are politically popular, often making even minor cuts difficult to achieve
Bush's budget warns that unsustainable growth in future mandatory spending represents the greatest threat to the nation's long-term fiscal health
"The 2007 budget paves the way for additional reforms that will be needed over the long term to bring Medicare's finances in line with available resources," the budget document said
In 2003, Bush pushed Congress to enact a Medicare prescription drug benefit, which took effect this year. The nonpartisan Congressional Budget Office estimates net spending for the benefit will rise from $30 billion in the current fiscal year to $155 billion by fiscal 2016
The House last week just barely passed a plan designed to rein in spending on a range of federal benefits programs by $39 billion over the next five years -- an amount equivalent to less than 0.5% of projected federal spending through 2011
[Spending cuts? What a pack of lies - Mish] |
