Bush to Seek Deep Cuts In Domestic Programs

President Bush this week will seek sharp cuts in highway projects, congressional environmental initiatives, job training and scores of other domestic programs, reflecting the trade-offs required by a fiscal 2003 budget that calls for record increases for the military and domestic security.

For weeks, Bush and members of his Cabinet have touted the president's spending initiatives on terrorism and the economic recovery, including a near doubling of spending on homeland security and a 13 percent boost in defense that would mirror the expansive Reagan-era military buildup.

Yet the administration has been less forthcoming about how it plans to do that. With war expenditures, the economic downturn and a major tax cut consuming the budget surplus, Bush has little choice but to cut or freeze spending in many parts of the government and to dip into Social Security and Medicare funds that previously were off limits, according to administration officials, congressional aides and special interest groups.

These reallocations of taxpayer dollars amount to a gradual but significant reshaping of the federal government's priorities by the Bush administration, details of which will be laid out on Monday when the president formally unveils his spending plan for the coming year.

Bush makes the case for his approach in a statement that will accompany his budget plan: "By curtailing unsuccessful programs and moderating the growth of spending in the rest of the government, we can well afford to fight terrorism, take action to restore economic growth and offer substantial increases in spending for improved performance at low-income schools, key environmental programs, health care and science and technology research, and many other areas."

Bush's budget will include an unusually sharp $9 billion cut in highway programs, due to the unexpected consequences of a budget formula that was designed to guarantee that the highway trust fund would be fully spent on highways and transit, officials said. This budget mechanism, called the Revenue Aligned Budget Authority formula, works well in an expanding economy but results in an unusually large cut when the economy turns down. The biggest loser is California, which is likely to lose nearly a quarter of the $2.5 billion in federal aid it is receiving this year, according to the Transportation Department.

For the second consecutive year, the Army Corps of Engineers will take a serious hit in Bush's budget, according to sources, as the administration will propose a 10 percent to 15 percent reduction, a freeze on new projects and renewed efforts to get the corps to focus on its mission of undertaking flood control, navigation and environmental projects. Last year, Congress thwarted efforts by the White House to cut the agency's spending by 14 percent.

The U.S. Conference of Mayors wrote the White House and Labor Secretary Elaine L. Chao last week protesting a proposal to eviscerate spending for a youth job training program, from $225 million this year to $45 million next year. The program passed Congress with overwhelming bipartisan support under the Clinton administration in 1998.

The grants go to 36 cities, including the District. Gregg Irish, director of the D.C. Department of Employment Services, said half of the District's five-year, $32 million program could be cut, even though teen unemployment in 2000 was 33.1 percent. "We need this. We need to build this system to deal with out-of-school youth," he said.

White House budget office spokesman Trent Duffy said yesterday that the training program proved far less effective in helping young people get jobs than the Job Corps.

Budget documents and analysts who have studied them say the administration is considering cutting an additional $620 million in grants to the states for training and education, including $350 million to youth programs other than the Job Corps, for which Bush announced he would ask for a $73 million increase.

The president will seek an overall reduction in EPA spending from this year's $7.9 billion to $7.6 billion, but an agency official said the aim is to eliminate a number of pork barrel projects that were added by Congress over the administration's objections. The administration will also seek a freeze on hiring to fill vacancies in the enforcement division while shifting $10 million to the states for increased enforcement activities.

The administration tried to eliminate 270 enforcement positions last year, but that proposal was blocked by the Senate.

The budget Bush will release on Monday seeks $2.13 trillion in overall spending in the fiscal year beginning Oct. 1 for defense, domestic programs, foreign aid and interest on the national debt. After several years of surpluses, the new budget projects that overall spending will exceed revenue by about $80 billion.

Administration officials have said that government spending other than for Social Security, Medicare and Medicaid is expected to grow by 9 percent next year, compared with the 4 percent growth this year. But when the big amounts for defense, homeland security and economic stimulus are set aside, the growth figure drops to 2 percent, barely keeping pace with the rate of inflation. Democrats, however, say their calculations show that spending would drop below this year's level.

The White House last year said that its budget would not touch Social Security payroll taxes to fund other parts of the government and was designed to pay down $2 trillion of the federal debt by 2010. But recent administration and congressional projections suggest that Social Security funds will be tapped for other programs through the rest of the decade, with little prospect for significant debt reduction.

"I think everybody understands our top obligation is to defend the nation," said Senate Budget Committee Chairman Kent Conrad (D-N.D.). "In effect, what the administration is doing is taking Medicare and Social Security funds and using them for tax cuts and additional spending. The question for the country is whether that's a wise direction for America. I think it is unwise."

The budget plan would save about $9 billion from changes in Medicaid accounting procedures, according to an administration official. It also proposes raising money by leasing mineral drilling rights in Alaska's Arctic National Wildlife Refuge, an initiative that Congress blocked last year.

In the weeks leading up to the budget's release, the White House and federal agencies have selectively announced increases for numerous federal programs that Bush has decided to recommend in his spending plan. In an administration that is highly disciplined in its release of information, these budgetary announcements represent a strategic effort to generate good news about areas of the budget that are important to constituencies whose support will be crucial to Republicans in the fall elections.

The administration has announced expansions of programs that are significant to Latinos and other minority groups, to the elderly, and to the social conservatives who are at the core of Bush's political base.

Last month, for instance, the administration announced that the budget would propose $2.1 billion in spending over the next decade so that poor immigrants who have lived legally in the United States for at least five years could, once again, become eligible for food stamps. On the Martin Luther King Jr. holiday, the White House announced a $12 million increase for programs intended to strengthen historically black colleges.

Early last week, the administration said it wants to spend $190 billion in the coming decade - less than Congress proposed last year - to modernize Medicare, the health insurance program for the elderly.

About $77 billion of those funds would be used to help older Americans with low incomes afford drugs by subsidizing states that already offer their own prescription drug programs to older residents.

Later in the week, Bush's top health aides announced measures intended to improve younger people's access to health care, including $89 billion worth of tax credits over 10 years to help working people buy insurance if they cannot get it through their jobs. And, in a move that pleased social conservatives, administration officials said they want to let states keep the $3.2 billion that they have not spent under a children's health insurance program for the working poor…and to make developing fetuses eligible for prenatal care under that program.

Bush appears ready to spend more money on Interior Department programs, to begin to make good on a campaign pledge to halt the deterioration of national park roads and facilities while launching programs favored by conservatives to encourage private stewardship of the land.

The budget will call for $1.58 billion for the general operation of national parks, a $107.5 million increase over current spending. The Interior Department budget will include $663 million to be used for eliminating a backlog of park maintenance and road improvement projects. However, that funding represents a minuscule increase over this year's level, and environmentalists warn that the administration is falling behind in its commitment to wipe out the $4.9 billion backlog.

At the Education Department, officials expect a modest overall budget increase, but nothing comparable to the $6.7 billion boost in spending in 2002 that raised the agency's budget to $48.9 billion.

"I'm completely pleased with that," said Education Secretary Roderick R. Paige. He said that in the next fiscal year the agency will focus on improving early childhood education, implementing the education reform law enacted last year and beginning the arduous process of revamping the nation's special education laws, which some critics say lead to a disproportionate designation of minority students and invite litigation.

Staff writers Michael Fletcher, Amy Goldstein, Don Phillips and Spencer Hsu contributed to this report.