President's Spending Plan Would Rival 2004 Deficit

By Michael Abramowitz and Jonathan Weisman
Washington Post Staff Writers
Sunday, February 3, 2008

President Bush will present a budget tomorrow that would slow the growth of Medicare and cut or eliminate an array of domestic programs but still anticipates a flood of new red ink that will rival the record deficits of his first term, administration officials said.

Bush's fiscal 2009 budget would increase defense spending by 5 percent and put a modest amount of new money into favored initiatives such as veterans affairs, education and homeland security.

But the president wants to dramatically slow the growth of big federal health programs, reduce anti-terrorism grants for states and cities, and cut spending on anti-poverty, housing and social service programs, according to budget documents and interviews with officials throughout the federal government.

Even as he proposes restoring funding for the controversial Reading First program, Bush will take aim at a number of education initiatives, officials said. The early literacy program Even Start would be eliminated, as would grants to states for education technology, technology careers and incarcerated youth. Funding for a college scholarship program named after Senate Appropriations Committee Chairman Robert C. Byrd (D-W.Va.) would fall from $40 million to zero, a symbolic shot at a fierce Bush critic.

The more than $3 trillion federal budget for 2009 that Bush will unveil is his final opportunity to shape the priorities of the government before leaving office a year from now. Lawmakers and their aides say Bush has little leverage left to force his proposals on a recalcitrant Congress.

But even in the unlikely event that he were to get his way, the budget deficit would jump sharply, from $163 billion in 2007 to about $400 billion in 2008 and 2009 -- partly the result of the new economic stimulus plan. Such deficits would rival the record deficit of $412 billion of 2004, though administration allies argue that shortfalls of that size now represent a smaller share of the overall economy and are thus more manageable.

Still, the new budget underscores Bush's inability to get control of spending over the course of his seven-year tenure, a failure that has concerned even his conservatives allies. The problem is projected to get worse in coming years with the retirements of the baby-boom generation, a big obstacle to the ambitious tax-cutting or spending plans of the leading presidential contenders.

Alice M. Rivlin, who served President Bill Clinton as budget director, pointed out that Bush "inherited a very large surplus," but his "legacy from a fiscal point of view is having blown an opportunity to ameliorate the long-run budget deficits."

White House officials and allies acknowledge the long-term problem but pin the blame on Congress for ignoring the president's calls to control the growth of Social Security and Medicare.

"The president recognized the big elephant in the room when it came to fiscal responsibility, and he did everything he could to get Congress to address it, but unfortunately Congress refused to deal with it," said Al Hubbard, who recently left his post as Bush's top economic policy adviser.

Administration aides said Bush's final year budget documents will very much reflect the major priorities of his first seven years -- keeping his tax cuts in place and adding significant increases for defense and counterterrorism.

Bush will push Congress to keep discretionary domestic spending programs just below $1 trillion next year, with programs outside of defense and homeland security growing less than 1 percent.

The president had success last year using his veto to force lawmakers to trim back spending bills, but this year Democrats are better positioned to simply wait for the next president, congressional aides said. That may mean less ferocity than usual in the budget battle as both sides wait to see the results of November's election.

But the growth of programs such as Medicare and Medicaid are on automatic pilot unless Congress writes a law to restrain them, a move Bush wants but one that appears highly unlikely. A Bush plan to slow the growth of Medicare would save $170 billion over five years, and fully $43 billion of that would come from Medicare Advantage, the private, managed care program that competes with the government-run fee-for-service program for the elderly, an administration official said.

Bush has defended Medicare Advantage from cuts proposed by Democrats, but this year, a senior administration official said, he will propose payment freezes to health-care providers that will affect all aspects of Medicare.

The budget will include $70 billion for the wars in Iraq and Afghanistan, although Bush has requested nearly $200 billion in 2008, much of which has yet to be approved by Congress. The five-year budget will contain no war-funding requests beyond 2009, leaving questions about how much to spend to the next president and Congress.

Officials said they expect the president's base budget for defense spending to rise about 5 percent to about $515 billion in fiscal 2009, reflecting the Pentagon's plan to expand the Army and Marine Corps for the ongoing wars in Iraq and Afghanistan and potential future conflicts.

Administration officials described fierce behind-the-scenes battles over spending in the final Bush budget. Secretary of State Condoleezza Rice went back three times to the internal budget review board -- which includes Vice President Cheney, Treasury Secretary Henry M. Paulson Jr., Chief of Staff Joshua B. Bolten and National Economic Council Director Keith Hennessy -- to appeal for more funds. In the end, she also spoke directly with Bush to secure an increase of $700 million for the State Department, 6.5 percent over last year's budget.

On the domestic front, the White House will call for trimming discretionary spending within the Department of Health and Human Services by more than $2 billion, to $74.2 billion, according to budget documents.

Among the reductions are more than $1 billion to programs run by the Administration for Children and Families, including a $280 million hit to the Low Income Home Energy Assistance Program, a block grant program that helps the poor pay heating and air-conditioning bills.

The budget plan argues for a $500 million reduction in the Social Services Block Grant program, which helps states protect children from neglect and abuse, and pay for day care, adoption, health services, foster care and other services for children and families.

The Centers for Disease Control and Prevention would lose more than $430 million, including $27 million from its efforts to detect and control infectious diseases, and $28 million from chronic disease prevention and health promotion. A $301 million program that trains 4,700 pediatricians and pediatric specialists at children's teaching hospitals also would be eliminated, at a time when pediatric specialties, such as rheumatology and pulmonology, face critical shortages.

Education Secretary Margaret Spellings said Bush will seek to restore funding for the embattled $1 billion-a-year Reading First program, an initiative at the center of his signature No Child Left Behind Act that has been besieged by allegations of conflicts of interest. Congress slashed funding for the program by 61 percent to $393 million in the 2008 budget.

"The president is going to work hard to get that funding restored, to ask for the billion dollars and help Congress see the error of their ways," Spellings said Friday in a conference call with reporters.

Money for the Safe and Drug-Free Schools Program would be sliced from $294 million to $100 million, and federal aid to afterschool programs would take a hit.

Bush will continue to boost Department of Homeland Security spending to tighten the borders. But states and cities would see cuts of $1.5 billion from the $3.75 billion in grants for security, law enforcement, firefighters and emergency medical teams approved by Congress for this year. The White House last year tried to slash state and local grants, but Congress ended up adding $1 billion instead.

Staff writers Maria Glod, Spencer Hsu, Christopher Lee, Josh White and Robin Wright contributed to this report.

View all comments that have been posted about this article.

© 2008 The Washington Post Company