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A Breathtaking Budget

Tuesday, February 8, 2005; Page A22

THERE ARE TWO ways to treat a president's budget proposal. The realistic, even cynical, method is to unmask the various bits of budget gimmickry involved, to assume that some aspects are dead on arrival, and to view the document as the administration's opening gambit in a long political chess match. The other is to take it seriously, as the administration's idealized vision of what government should be. Either way, the fiscal 2006 budget proposed yesterday by President Bush is breathtaking -- in the first approach as farce, in the second as tragedy.

First, the farcical aspects: To meet its claimed target of cutting the deficit in half by 2009, the new budget omits the cost of the war in Iraq; the cost of the president's proposed private accounts for Social Security; and the cost of correcting the alternative minimum tax, which is hitting growing numbers of middle-class taxpayers rather than the rich it is intended for.

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To make its already unaffordable tax cuts permanent, the administration wants to change the budget-scoring rules so that the cuts show up on the score card as cost-free. In fact, making them permanent would cost $1.1 trillion over the next 10 years. To obscure the real-world consequences of its unrealistic spending caps for discretionary programs, the administration has neatly avoided the inconvenience of specifying where, in future years, the necessary cuts would be made. It eliminated the traditional tables from the budget documents showing what spending would be in those programs beyond next year.

As to the tragic: Budget austerity is wise, but cuts as draconian as the administration proposes are not necessary and would fall too heavily on those who can tolerate it least. Under the administration's discretionary spending caps, spending for defense and homeland security would be permitted to grow, as it must; for example, military spending (and this doesn't include the costs of war in Iraq) would rise from $400 billion this fiscal year to $419 billion in 2006 to $492 billion in 2010. By contrast, other discretionary spending would be trimmed, from $391 billon this year to $389 billion next year and frozen at that level through 2010. Given expected inflation, this would mean a cut, in real terms, of 14 percent by 2010 in such areas as housing, environmental protection, education and transportation.

If implemented, this would bring a dramatic restructuring of federal spending. In 2002, spending for programs other than defense and homeland security accounted for about half of discretionary spending; by 2010, that would fall to just 42 percent. Interest payments on the national debt would amount to just $75 billion less. The administration also wants to make cuts in entitlement spending -- some of them laudable, albeit politically unlikely, cuts in agricultural subsidies, others more worrisome, particularly the $45 billion over 10 years that is to be cut from Medicaid, the shared federal-state health care program for the poor and disabled. Food stamp benefits would be eliminated for 200,000 to 300,000 people, and a freeze in child-care funding would cut the number of low-income children receiving help by 300,000 in 2009.

The administration and its allies depict these cuts as the unhappy but inevitable consequence of tough budgetary times. "This is not a time when we can have guns and butter in excess. We're going to have a fair amount of butter," said Senate Budget Committee Chairman Judd Gregg (R-N.H.). "But it's just not going to be at the level that it might have been in the past if we weren't at war." This maddeningly blinkered mindset ignores the impact of the Bush tax cuts, which were at once unaffordable and tilted to the wealthiest Americans. Next year alone, the cost of the administration's already enacted tax cuts will be $192 billion, not including added interest.

"It's a budget that sets priorities," Mr. Bush told reporters yesterday. That it does. The problem is that some of those priorities are flat wrong.

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