Bush’s record $3.1 trillion budget would bring big increase in deficit

? The record $3.1 trillion budget proposed by President Bush on Monday would produce eyepopping federal deficits, despite his attempts to impose politically wrenching curbs on Medicare and eliminate scores of popular domestic programs.

The Pentagon would receive a $36 billion, 8 percent boost for the 2009 budget year beginning Oct. 1, even as programs aimed at the poor would be cut back or eliminated. Half of domestic Cabinet departments would see their budgets cut outright.

Bush’s overall request for defense spending in 2009 is $588.3 billion, compared with $670.5 billion this year. But it includes only $70 billion for initial war costs in Iraq and Afghanistan, $119.1 billion less than has been projected for this year. That $70 billion is almost certain to increase.

Slumping revenues and the cost of an economic rescue package will combine to produce a huge jump in the deficit to $410 billion this year and $407 billion in 2009, the White House says, just shy of the record $413 billion set four years ago.

But even those figures are optimistic since they depend on rosy economic forecasts and leave out the full costs of the war in Iraq. The White House predicts the economy will grow at a 2.7 percent clip this year, far higher than congressional and private economists expect, and the administration’s $70 billion figure for military operations in Iraq and Afghanistan is simply a placeholder until the next president takes office.

Bush’s lame-duck budget plan is likely to be ignored by Congress, which is controlled by Democrats and already looking ahead to November elections. His long-term projections are mostly academic since he’s leaving office next January.

The president forecasts a $48 billion surplus by 2012, keeping a promise he made two years ago when strong revenue predictions made it look far easier. Now, he’s relying on spending cuts – for everything from transportation to Medicare and Medicaid to nonprofit groups that help the poor – to do the job in order to keep his signature 2001 and 2003 tax cuts intact instead of expiring at the end of 2010.

“Our formula for achieving a balanced budget is simple: create the conditions for economic growth, keep taxes low and spend taxpayer dollars wisely or not at all,” Bush said in his budget message.

Democrats said the forecast of a budget surplus in 2012 was based on flawed math that included only $70 billion for the wars in Iraq and Afghanistan in 2009 and no money after that. The budget plan also fails to include any provisions after this year for keeping the alternative minimum tax, originally aimed at the wealthy, from ensnaring millions of middle-class taxpayers. The Congressional Budget Office estimates that fixing the AMT in 2012 would cost $118 billion, more than double the surplus Bush is projecting for that year.

Jim Nussle, the White House budget director, said the softening economy, continuing war costs and the deficit-financed economic stimulus measure soon to clear Congress were responsible for the worsening deficit picture. And he said that the deficits experienced during the Reagan years and Bush’s father’s administration were far worse when compared to the size of the economy.

“It’s a manageable deficit – it isn’t the largest in history by any stretch of the imagination – and it’s one that can be managed if we get economic growth back on track,” Nussle said.

Bush is leaving his successor an enormous fiscal dilemma. The deficit numbers will mean pressure to allow some tax cuts to expire, especially the 35 percent bracket for wealthy taxpayers, which will revert to 39.6 percent at the end of 2010 unless renewed. Pressure from Wall Street to trim the deficit may cause even Democrats to go after the spiraling growth of Medicare and the Medicaid health care program for the poor and disabled.

Bush proposes killing or cutting back sharply 151 programs to save $18 billion next year. Many of those cuts have been proposed and rejected by Congress before, such as moves to eliminate community services grants to nonprofit groups that help the poor, a food program aimed at low-income seniors and grants to help states keep illegal immigrants convicted of felonies in jail. Lawmakers will surely restore proposed cuts to clean water grants, funding for local law enforcement and homeland security grants to states and local governments.