President Bush sent to Congress a $2.9 trillion
The proposal seeks to make permanent the tax cuts enacted in 2001 and 2003, costing the Treasury an additional $374 billion over five years. And it would slice nearly $96 billion over five years from Medicare and Medicaid, the government's health care programs for the poor and the elderly. The proposal would also cut spending at eight federal agencies -- including the education, environment and interior departments -- to below fiscal 2006 levels.
Bush said his budget proposal "shows we can balance the budget in five years without raising taxes." The budget is "realistic, it's achievable and it's got good reforms in it," he said.
"Our priority is to protect the American people. And our priority is to make sure our troops have what it takes to do their jobs," Bush told reporters after meeting with his Cabinet at the White House. "We also have got priorities in national parks and education and health care," he said, urging Congress to "listen to a budget which has no tax increase" and that "because of fiscal discipline . . . can be balanced in five years."
Democrats, who control Congress for the first time since Bush took office, quickly attacked the proposal in a flurry of written statements.
House Speaker Nancy Pelosi (D-Calif.) described the budget proposal as "more of the same fiscal irresponsibility and misplaced priorities," and she complained that the new funding requests for the war in Iraq "give the American people no hope" of a reduction in U.S. military involvement in the foreseeable future.
Vowing "the most rigorous congressional scrutiny possible," Pelosi warned, "Democrats will not give the president a blank check on Iraq."
Senate Majority Leader Harry M. Reid (D-Nev.) charged, "The budget uses deception to hide a massive increase in debt, and its priorities are disconnected from the needs of middle-class Americans." Bush "insists on spending billions on $150,000 tax breaks for multi-millionaires at the expense of the middle class," and his budget "hands out favors for the oil and gas industry while eroding health coverage for children and seniors," he said.
"The president's budget is filled with debt and deception, disconnected from reality, and continues to move America in the wrong direction," Senate Budget Committee Chairman Kent Conrad (D-N.D.) said. "This administration has the worst fiscal record in history, and this budget does nothing to change that. It clings to the same misguided policies: costly tax cuts that primarily benefit the wealthiest, cuts in domestic priorities, and more fiscal irresponsibility."
The projected five-year cost of extending Bush's tax cuts comes on top of $1.1 trillion that the cuts have already cost since 2001.
In a brief statement and question-and-answer session following this morning's Cabinet meeting, Bush called on Congress "to do something on earmarks," the appropriations for lawmakers' pet projects that cost taxpayers billions of dollars a year. "In order to make sure that we're fiscally responsible with the people's money, Congress needs to make sure that when they spend the people's money there's transparency and an up-or-down vote for each item," Bush said.
He also repeated his call for a line-item veto, saying, "It's one thing to get the size of the budget pie right; it's another thing to make sure that the slices in that pie meet national priorities."
Bush was asked whether declining projections for spending on the war in Iraq mean that he is effectively setting a timeline for ending the war, reversing his steadfast opposition to timetables of any kind. He denied that the projected drop-off in war spending held any such implications, but he did not otherwise explain it.
"There will be no timetable set," Bush said. He said this was because "we don't want to send mixed signals to an enemy or to a struggling democracy or to our troops."
The proposed budget asks Congress for nearly $100 billion more for the wars in Iraq and Afghanistan in fiscal 2007 -- on top of $70 billion already provided -- and $145 billion for fiscal 2008, which begins Oct. 1. For fiscal 2009, there is a forecast of $50 billion, with no funding projections beyond that year.
Asked about the $50 billion figure for 2009 and whether that represents a sharp drop in war costs, White House budget director Rob Portman told reporters, "I think we call it an allowance, and it's a notion that we believe there will still be war costs in 2009. We have no idea what those costs will be."
According to the nonpartisan Congressional Budget Office, Congress has appropriated more than $500 billion for the "Global War on Terror" since the Sept. 11, 2001, terrorist attacks, and the new funding request would increase that figure to nearly $745 billion through fiscal 2008.
The Pentagon accounts for the bulk of that spending, but other government departments also contribute to it. For example, in addition to asking Congress to give the Pentagon $141.7 billion to fund military operations in Iraq and Afghanistan in fiscal 2008, the new budget proposal seeks more than $1.8 billion for the State Department to strengthen democracy in Iraq by various means, including programs to create jobs and improve Iraqi government ministries.
The budget includes funding to increase the permanent size of the Army and Marine Corps to "reduce stress" on the military and raise readiness. The Army would grow to 547,400 members by 2012, up from 482,400 at present, and the Marines would increase their ranks from 175,000 to 202,000 by 2011.
Including supplemental funding for the wars in Iraq and Afghanistan and various discretionary and mandatory expenditures, the Defense Department budget would grow to $583 billion in total outlays in 2008, compared to $549 billion in 2007 and $499 billion in 2006, the budget proposal says.
In reply to another question after the Cabinet meeting, Bush sought to put the best face on criticism from Iraqi officials that the United States has been too slow to implement its new strategy to secure Baghdad, accounting for a surge of violence in the Iraqi capital in recent days. He said the new commander of U.S. forces in Iraq, Army Lt. Gen. David H. Petraeus, is heading to Baghdad tomorrow.
"I appreciate the fact that the Iraqi government is anxious to get security inside the capital of their country," Bush said. "It's a good sign. It's a good sign that there's a sense of concern and anxiety. It means that the government understands they have a responsibility to protect their people. And we want to help them."
Bush said the success of the new security plan "is going to depend upon the capacity and willingness of the Iraqis to do hard work."
The president's budget proposal shows the federal deficit falling in each of the next four years, leading to a $61 billion surplus in 2012, administration officials said. But to get there, Bush is counting on strong economic growth, diminishing costs in the Iraq war and tight domestic spending to offset the cost of his tax cuts.
Democrats predicted that Bush's proposal to extend his tax cuts past their 2010 expiration date would dig the nation deeper into debt rather than produce a budget surplus. Republicans countered that the tax cuts are critical to maintaining a healthy economy and that a balanced budget is not possible without them.
"Raising taxes . . . won't help balance the budget -- it will slow the economic growth that is creating the new jobs of tomorrow and increasing revenue to the federal government," House Minority Leader John A. Boehner (R-Ohio) wrote in an essay distributed yesterday by his office. "Keeping our economy strong and promoting fiscal responsibility will get the job done. Raising taxes won't."
Republicans hope to make the tax cuts a central feature of this year's budget debate. While both the White House and Democratic leaders have vowed to eliminate the federal deficit by 2012, the Democrats have signaled their intention to do it in part by targeting tax breaks for corporations and taxpayers earning more than $500,000 a year.
Recent estimates by the Congressional Budget Office suggest that it would be difficult to balance the budget if the tax cuts -- a collection of rate reductions and tax credits that have reduced Treasury collections by an estimated $1 trillion since 2001 -- continue.
According to the CBO, a vibrant economy has indeed produced a gusher of revenue over the past two years that could help turn the nation's $248 billion deficit into a $170 billion surplus by 2012. But if the tax cuts and other expiring tax provisions are extended, the CBO predicts, the deficit would hit $146 billion in 2012 and grow thereafter as health costs skyrocket and the baby-boom generation retires.
The White House takes a different view, assuming that continuing the tax cuts would produce slightly more robust economic growth than the CBO foresees.
"The big difference between CBO and us is the tax relief. They don't make it permanent, and we do. And we stand behind the economic benefits of the tax relief," said an administration official, speaking on the condition of anonymity before the release of the budget.
There are other differences between the two projections. Bush's budget projects slower spending growth from 2008 to 2012, with outlays rising 11.8 percent, compared with 14.7 percent in the CBO's estimates.
Administration officials also exclude some potentially expensive items. Their request, for the first time, attempts to show the true cost of the wars in Iraq and Afghanistan in the coming fiscal year.
In addition to reducing spending for Medicare and Medicaid, the budget proposal would provide insufficient extra cash to maintain coverage for poor children currently enrolled in the Children's Health Insurance Program.
Democrats blasted those proposals, noting that the Republican-controlled Congress last year did not approve much smaller reductions in federal health-care spending.
"Rather than trying to solve our health care crisis by lowering costs and covering more people, the president's plan will make the crisis worse by raising costs and failing to cover those who need it most -- our nation's children," Sen. Edward M. Kennedy (D-Mass.) said yesterday in a statement.
Democrats also pointed to an assumption common to projections by the CBO and White House: Both assume that the alternative minimum tax will be permitted to expand to millions of additional families, generating billions in additional tax dollars by 2012. Democrats and some Republicans have vowed to halt the growth of the tax and, ultimately, repeal it.
Portman, the White House budget director, defended the administration's efforts to rein in Medicare and Medicaid, telling reporters today that the growth of entitlement spending is "overwhelming the rest of the budget" and is "simply not sustainable." He produced a chart showing that this mandatory spending has grown from 26 percent of the budget in 1962 to 53 percent in 2006, and is still going up.
The five-year budget proposal "makes an important down payment towards sensible reform of mandatory spending, reducing spending growth by $96 billion over five years," Portman said. The proposals "deliver more savings over time," he said, adding, "The changes we have proposed to Medicare would reduce the unfunded obligation of the program by almost 25 percent, or $8 trillion, over the 75-year horizon."
Portman called the proposal a "tight budget, but a more realistic budget" that contains much to appeal to Democrats, such as a small increase in non-security domestic spending, the first in two years.
But Democrats were skeptical.
"With their track record, everything they present is going to be viewed skeptically. Because they've been deceptive year after year after year," said Conrad, the Senate Budget Committee chairman. "Every projection shows the cost of making all the tax cuts permanent explodes at the very time the baby boomers start to retire," driving "the deficit and the growth of the debt to the moon."