Analysis: Bush plan does little to reduce deficit

Critics blast election year budget, doubt promises

? After watching the federal deficit surge in his first three years, President Bush signaled in his 2005 budget request Monday that he will be a tight-fisted chief executive if re-elected and cut the red ink in half by 2009.

But many of his critics do not see this transformation as entirely believable, because the deficit will hit a record $521 billion in the current fiscal year — and because Bush did not concern himself much about budget restraint in funding his first-term priorities.

As a result, the president finds his election-year budget is being sharply questioned on many fronts. It leaves out some significant anticipated spending items, such as the next round of money for Iraq and Afghanistan, which could be as much as $50 billion. It favors the Pentagon at the expense of domestic programs. It proposes to eliminate some programs that have survived previous shut-down attempts.

He will encounter major resistance to his spending restraints as well as to some of his favorite initiatives, such as making his tax cuts permanent; introducing a series of new, virtually tax-free retirement and savings accounts; and providing new tax breaks to enable the poor to buy health insurance.

Speak now, pay later

Even if these plans never get off the ground in Congress, Bush will seek to take credit for them this year. For example, he proposed setting up an outpost on the moon and a manned mission to Mars, even though the first mission would not begin until 2015. He proposed $1 billion over the next five years to get this project started, a mere drop in the bucket. He also faces a problem with proportional sacrifice. The defense budget would go up by 7 percent, and spending for homeland security by 10 percent, while other domestic spending — not including Social Security, Medicare and other mandatory programs — would be allowed to rise only 0.5 percent.

Austerity was not Bush’s strong suit in his first three years. Now, he must demonstrate that he is serious, said budget experts. They suggested a good place to start would be a veto of a popular transportation bill now in Congress, with a price tag of more $300 billion over six years. Bush wants to hold that figure to $256 billion without raising gasoline taxes.

Political maneuvers

Bush is also seeking to renew automatic spending restraints that prevailed during the 1990s, but which Congress allowed to expire. He may have a hard time, considering Democrats sharply oppose his budget priorities.

“Going back to the Clinton administration, it seems to me that presidents have taken their budgets less seriously and really haven’t enforced the spending totals,” said Rudy Penner, a former director of the Congressional Budget Office. “Clinton was rare with vetoes, and Bush has not vetoed a single bill.”

Some conservative critics said defense and homeland security should be closely scrutinized and also share in the sacrifice. “I think they ought to cut the defense budget,” said Chris Edwards, budget analyst for the Cato Institute, a libertarian think tank. “Defense has risen 47 percent in just three years. Isn’t that enough?”

The deficit’s rise as a political issue appears to be a big motivation for Bush’s new emphasis on spending curbs. Democrats and conservatives in his own party are questioning his commitment to scale back spending, and reducing the deficit by more than 50 percent by 2009 — from $521 billion to $237 billion — will prove challenging, said a number of analysts.

“It is more likely that they will find a nuclear bomb in Baghdad than they will succeed at cutting the deficit in half by 2009,” said John Podesta, who served as President Bill Clinton’s chief of staff and now is president of the Center for American Progress, a liberal-leaning think tank.

“It can be done, but it will take strong leadership and the use of the veto,” said Brian Riedl, budget analyst for Heritage Foundation, a conservative-leaning think tank. “This budget is an encouraging first step, but there is a lot of work ahead for the administration.”

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Critics say Bush would be much more credible with his goal if he had not left out some significant items in his budget, such as another emergency spending bill for Iraq and Afghanistan. The president’s budget director, Joshua Bolten, told reporters that the next spending measure to fund those operations would be no higher than $50 billion, but would not be introduced until after the November election.

If it is $50 billion, this means that the deficit for 2005 — now estimated at $364 billion — would be at least $414 billion. The first emergency supplemental bill for Iraq and Afghanistan totaled $87.5 billion.

Also omitted is a long-term fix for the so-called alternative minimum tax, a levy designed years ago to prevent wealthy people from escaping taxes altogether. This tax is beginning to make taxes for many middle-class Americans go up. Bush has proposed enough funds to fix this problem for one year, but the 10-year cost is nearly $400 billion.

The president also wants to make his tax cuts permanent, which would drain the revenue side of the budget and make the deficit deeper. According to the Congressional Budget Office, making the tax cuts permanents would add $1.2 trillion to the deficit over the next decade. Bush is proposing to end only one tax break, for businesses that install new equipment.

Perhaps Bush’s most difficult job will be to make cuts in programs popular with many members of Congress — such as agriculture, which would be reduced by 8.1 percent, and the Environmental Protection Agency, by 7.2 percent. Seven of the 16 departments would have their budgets cut.

Alice Rivlin, a former director of the Congressional Budget Office, expressed doubt that Congress would go along with Bush’s domestic spending cuts. “He has some very hard battles to win,” she said.

Even by Bush’s own calculation, reducing the deficit to $237 billion by 2009 requires strong economic growth and significant borrowing from the Social Security and other trust funds. If no money were borrowed from trust funds this year, the deficit would be $695 billion; in 2009, it would be $501 billion.

Edwards of the Cato Institute said Bush should get tough and aim for a balanced budget, not just cutting it in half. If not, he said, the country could face large deficits throughout the next decade, when the Baby Boom generation begins to retire.