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Bush presents budget with record deficits, new tax cuts

Tuesday, February 4, 2003

WASHINGTON -- President Bush shipped lawmakers a $2.23 trillion budget for 2004 on Monday bearing record deficits and seeking deep new tax cuts, an ambitious expansion of Medicare and bolstering security at home and abroad at the expense of domestic programs.

Though Republican majorities in Congress mean Bush's plans will get a better reception than last year's did when Democrats ran the Senate, some elements will clearly be reshaped, like his call for a fresh 10-year, $1.3 trillion tax cut. Whatever happens, the proposal sets the stage for a partisan battle over fiscal priorities likely to rumble right into next year's White House and congressional elections.

Democrats said the budget would deepen government debt just as it should be shoring up Social Security and Medicare for the approaching retirement of the 76 million-strong baby boom generation.

"Buried in President Bush's budget is a plan to dismantle Social Security and Medicare," said Rep. Charles Rangel of New York, the House Ways and Mean's Committee's top Democrat. "By demanding large tax cuts again even though there are no longer surpluses, the administration will starve the government of funds."

The president said his plan focused on the most important challenges facing the nation.

"A recession and a war we did not choose have led to the return of deficits," Bush said in a message accompanying the five-volume, 13.5-pound blueprint. "My administration firmly believes in controlling the deficit and reducing it as the economy strengthens and our national security interests are met."

One item sure to get special attention on Capitol Hill was Bush's proposal to give NASA a modest 3 percent increase to $15.5 billion in the fiscal year that begins Oct. 1.

The budget, completed before Saturday's space shuttle Columbia disaster, included $3.97 billion for the shuttle. The administration said that was 4.7 percent more than it expected Congress to approve for 2003 when lawmakers finish this year's overdue spending bills.

The Justice and Labor departments were the only Cabinet-level agencies whose overall budgets would decline. But to contain burgeoning red ink, proposed cuts included some Army Corps of Engineers water projects, rural development, high technology aid to business, and state grants for fighting drugs in schools and for clean water.

$304 billion deficit

While Bush predicted last year that the government would dip its toe into deficits for just three years, Monday's spending plan acknowledged hefty shortfalls as far as the eye can see -- a projection both parties fought to turn to their advantage.

Bush projected deficits of $304 billion this year and $307 billion in 2004, easing to $190 billion in 2008, the final year shown. Not factored in was a possible war with Iraq likely to cost at least tens of billions of dollars.

The highest deficit on record was $290 billion in 1992, when Bush's father was president.

Less than two years after Bush projected $5.6 trillion in surpluses for the next decade, on Monday he estimated $1.08 trillion in cumulative deficits for the coming five years alone. The budget mostly projected five years ahead instead of the 10 years customary recently, with administration officials saying longer forecasts are guesswork. Democrats said Bush was avoiding showing the full, bleak picture.

"You'd think in the face of a reversal like that, they'd offer a process or plan to right the budget. There is none," complained Rep. John Spratt of South Carolina, lead Democrat on the House Budget Committee.

Also weighing in were presidential contenders like Rep. Dick Gephardt, D-Mo., who said, "According to the president's budget, what he cares most about is giving a tax cut to the taxpayers who need it the least."

White House budget chief Mitchell Daniels responded that balancing the budget "is not the top, let alone the only priority." He said eliminating deficits could only be achieved by strong economic growth and spending restraint.

House Speaker Dennis Hastert, R-Ill., called the plan "a commonsense budget" that "makes the necessary investments in the future without spending our nation into bankruptcy."

Strikingly, the $1.3 trillion in tax cuts Bush proposed Monday amid looming deficits was only marginally less than the $1.6 trillion he proposed two years ago as projected surpluses soared.

The lion's share of his new proposal was $695 billion for stimulating the economy, dominated by a slash in taxes on corporate dividends. That benefit became $25 billion more generous at the 11th hour.

Bush also proposed to make the 2001 tax cuts permanent at an additional cost of $588 billion. That package, enacted at $1.35 trillion, would otherwise expire after 2010.

Revamping Medicare

The president called for setting aside $400 billion over the next decade for revamping Medicare, the health-insurance program for 41 million elderly and disabled people, including adding prescription drug coverage. But he provided few details, ensuring a battle with Democrats already claiming that his proposal is inadequate and would force seniors into managed care plans.

Bush proposed to give states more latitude in spending federal funds for Medicaid, which provides health coverage for the poor, and for Head Start preschools in low-income neighborhoods. Democrats say Bush's plans, his response to states reeling from their own deep deficits, are a step toward dismantling both programs.

The president would spend $782 billion next year for the operations of all federal agencies, excluding the two-thirds of the budget that covers automatic benefits like Social Security. That is $30 billion, or 4 percent, more than Bush has so far sought in the bills for this year that lawmakers are still writing.

Of that, half would be for the Pentagon, giving it a 4.2 percent increase over this year to $380 billion. Underscoring Bush's drive to curtail spending, that paled compared with the 11 percent boost the military won in 2002.

The new Department of Homeland Security would grow to $26.7 billion, $1.3 billion more than its component agencies are on course to get this year.

Other increases would go for veterans health care, education for disabled and low-income children, and fighting AIDS in Africa and elsewhere overseas.

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On the Net

Congressional Budget Office: www.cbo.gov

Office of Management and Budget: www.whitehouse.gov/omb


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