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Bush's Budget Projects Deficits

President Bush discusses the 2009 budget following a cabinet meeting Monday at the White House.Video by AP

Bush's budget, for the fiscal year that begins Oct. 1, is austere except for a handful of agencies including the Defense Department, which would grow by about 7 percent over the discretionary spending approved for the current year. The president would slice $14.2 billion from the growth of federal health-care programs in 2009, eliminate scores of programs and virtually freeze domestic programs.

The plan would continue Bush's first-term tax cuts beyond their 2011 expiration date -- at a cost to the Treasury of $635 billion through 2013 -- extend abstinence education programs, create elementary and secondary education vouchers, and guard other White House initiatives.

The president also takes aim at programs that Congress has zealously preserved -- and is likely to continue protecting. Among the programs Bush would eliminate are food programs for poor children, research assistance to manufacturers, career and technical education grants, weatherization assistance, community development grants, graduate medical education at children's hospitals and a public housing revitalization program that the House just overwhelmingly reauthorized.

The president's budget stands in sharp contrast to the priorities of the Democratic-controlled Congress, which lawmakers said is likely to wait out Bush's presidency rather than accede to many of his demands.

As in past years, the budget has several features that may make the deficits even larger than Bush anticipates.

For instance, it makes room for $61 billion in 2009 to stop the growth of the alternative minimum tax, a parallel tax system that was enacted in 1969 to make sure the rich pay income tax, but that is increasingly squeezing the middle class. The cost of a fix will continue to grow each year, but the budget makes no more allowances for that.

The document also assumes $70 billion in costs for the Iraq and Afghanistan wars next year, a fraction of the true costs, which could reach $200 billion in 2008. Beyond 2009, the budget includes no war costs at all.

Pentagon spokesman Geoff Morrell said last week that the $70 billion request was only enough to close out the Bush administration, making explicit the Defense Department's desire to let the next president finish the job of funding the war. "Three-quarters of that budget in '09 will be executed by a subsequent administration," he said.

To reach his deficit forecast, the president assumes economic growth this year of 2.7 percent, a full percentage point higher than the Congressional Budget Office estimate and much higher than the forecasts of some private economists, who believe the nation may already be in a recession. Adopting the CBO's forecast would eliminate about $340 billion in expected tax revenues, said Tom Kahn, staff director of the House Budget Committee.

Bush also foresees raising $2.1 billion in health-care fees on non-disabled veterans through 2013. A promised crackdown on tax cheats is supposed to raise $10.5 billion over that time. And under the budget, domestic programs not related to defense or homeland security would be frozen at $393 billion between 2010 and 2013.

"It's not going to happen," said Sen. Judd Gregg (N.H.), the ranking Republican on the Senate Budget Committee, who called Bush's budget more of "an academic exercise" than "a real budget."

"Maybe a $400 billion deficit forecast will get people to notice," Gregg added. "But in an election year, we haven't seen very much seriousness, and this budget certainly falls into this category."

Former Bush economic adviser Lawrence B. Lindsey, while applauding the short-term stimulus package as wise fiscal policy, said neither the White House nor Democrats are being particularly realistic about the longer-term fiscal challenges facing the country. He said the president is proposing a freeze on spending and Democrats are anticipating using revenue from expiring tax cuts.

"Neither of those probably will work out the way they expect," he said. "Let's face it -- the last thing Washington does is freeze spending for any sustainable period of time. And the fiscal and macroeconomic effects of letting the tax cuts expire are huge."

With little prospect for action, the fiscal problems will fall to the next president, and they could be considerable. "They are going to inherit a fiscal meltdown. It's just as clear as it can be," said Senate Budget Committee Chairman Kent Conrad (D-N.D.).

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