Bush Plan Reins In Domestic Spending

Proposal Aims to Balance Budget And Fund Wars

Washington Post Staff Writers
Tuesday, February 6, 2007; Page A01

President Bush took aim yesterday at domestic spending as part of a plan to balance the budget in five years without raising taxes while increasing funding for the Iraq war and permanently expanding the military.

With the $2.9 trillion budget he submitted to Congress, Bush signaled he would attempt to squeeze spending on health care, education, housing and other domestic programs important to the Democratic majority for the duration of his term. Overall domestic spending would be held below the rate of inflation in the fiscal year that begins Oct. 1 and frozen thereafter.

The new Bush budget would also seek to reduce the rapid rate of growth in Medicare and Medicaid, trimming $101 billion from the two programs over the next five years by reducing payments to health-care providers and forcing wealthier seniors to pay more for physician services and prescription drug coverage. And it would provide additional funds for the Children's Health Insurance Program, but not enough to maintain the same enrollment over the next five years, according to independent analysts.

Bush said his plan would bolster national security while "keeping the economy strong with low taxes and keeping spending under control." But Democratic leaders, who will control the budget process for the first time since Bush took office, immediately denounced the plan as an irresponsible attempt to make costly tax cuts for the wealthy permanent and to finance the war by shortchanging children, the elderly and the nation's long-term fiscal health.

"It is disingenuous for the president to suggest cuts to Medicare and Medicaid that he knows the Congress will not support," said House Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.). "It's not going to happen."

Some Democrats also questioned the president's math, saying his budget plan relies on a series of rosy economic assumptions to transform the nation's $248 billion deficit into a $61 billion surplus by 2012. Even if the plan is successful, Democrats noted, the president would only be restoring the country's fiscal condition to the surplus he inherited when he took office in 2001.

"This budget is filled with debt and deception, disconnected from reality, and continues to move America in the wrong direction," said Senate Budget Committee Chairman Kent Conrad (D-N.D.).

While the spending blueprint met resistance from Democrats, it appeared to shore up the president's position with conservatives in his own party, who have been deeply unhappy with the growth of federal spending over the past six years. In comments to reporters yesterday, Bush emphasized his desire to reduce the number of congressional pork-barrel projects, known as earmarks, and acquire a line-term veto -- favorite initiatives of fiscal conservatives.

Extending Bush's first-term tax cuts, a collection of rate reductions and tax credits that has kept more than $1 trillion in taxpayers' pockets since 2001, would cost the Treasury an estimated $374 billion between 2008 and 2012, according to the administration. Most of the cuts are scheduled to expire in 2010.

Bush's advisers yesterday credited the tax cuts for the nation's healthy economy and said keeping them in place is essential to maintaining economic growth. A growing economy, in turn, they said, will continue to stimulate tax collections, making it possible to balance the budget even while paying increasing sums for the Iraq war.

White House budget director Rob Portman stressed that point in a briefing for reporters. "The cost of the war is reflected in the administration's deficit projections," he said. "In fact, there has been a $165 billion decrease in our deficit over the past two years, and that includes all of the war costs that we've incurred during that time."

Bush's proposed fiscal 2008 budget would provide another big boost in spending for the war and overall defense and diplomatic spending. The budget plan includes $623 billion for the military next year, including $141 billion for the wars in Iraq and Afghanistan and a $50 billion down payment on the president's plan to permanently increase the size of the armed forces by 92,000 over the next five years.

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