Bush budget cuts Medicaid, nine Cabinet departments

WASHINGTON -- President Bush proposed a $2.57 trillion budget Monday that erases scores of programs and slices Medicaid, disabled housing and many more but still worsens federal deficits by $42 billion over the next five years.

In one of the most austere presidential budgets in years, Bush would give nine of the 15 Cabinet-level departments less money in 2006 than they are getting this year. Overall, he would cut domestic spending not related to security-- excluding automatically paid benefits like Medicare -- by nearly 1 percent next year. Bush said it was the first such reduction proposed by the White House since President Reagan's day.

Forty-eight education programs would be eliminated, including one for ridding drugs from schools. In all, more than 150 government-wide programs would be eliminated or slashed deeply, including Amtrak subsidies, oil and gas research, and grants to communities hiring police officers.

Bush would slow the growth of benefit programs by $137 billion over the next decade, nearly quadruple the savings he proposed a year ago with little success. Chief among the targets would be Medicaid, the federal-state health insurance program for the poor and disabled, but farmers' payments, student loans and veterans medical services were also on the chopping block.

"It's a budget that focuses on results," Bush said after meeting with his Cabinet. "The taxpayers of America don't want us spending our money into something that's not achieving results."

Yet largely because of Bush's plans for a defense buildup, this year's Iraq and Afghanistan war costs, and a handful of new tax cuts, the budget shows that deficits over the five years ending in 2010 would total nearly $1.4 trillion.

That is $42 billion worse than they would be if the government continued current spending levels and made no changes to tax law other than making permanent his already enacted tax cuts, his budget tables showed.

Bush's blueprint would leave next year's deficit at an estimated $390 billion -- and omit any new money next year for wars in Iraq and Afghanistan. That would be a reduction from last year's record $412 billion shortfall and would still leave Bush on his course to halve deficits by 2009, the White House said.

Even so, a $390 billion shortfall would be the third worst ever if his projection for $427 billion in red ink for this year comes true.

Without Bush's new tax and spending plans, the 2006 deficit would otherwise be $361 billion, the budget tables showed. The figures demonstrated how federal costs are soaring despite growing revenues the economy is pumping into the government.

Bush's package faced an uncertain fate in Congress, where conservatives seemed ready to demand deeper deficit reduction and Democrats -- and some Republicans -- were sure to resist its spending cuts.

Underscoring the jostling that lawmakers were preparing for, House Speaker Dennis Hastert, R-Ill., lauded the plan as "a blueprint to fund our nation's priorities" but called it "a good starting point for the Congress to begin its work."

Democrats chided the package for its proposed cuts and because they said it obscured more serious deficit problems ahead. They complained it excludes next year's war costs and the price tags of Bush's Social Security overhaul and of keeping the alternative minimum tax from affecting more middle-income families.

"Why is he playing this hide-and-seek game?" asked Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee. "I believe it's because he really doesn't want people to know where he is headed."

Bush was expected to propose an $81 billion war package for the rest of 2005 in a few days. Congress has already approved $25 billion for the year.

Besides omitting the impact of revamping Social Security, Bush proposed no specific savings at all from Medicare, the health program for the elderly and disabled. The $340 billion-a-year program, though $200 billion smaller than Social Security, faces a long-term solvency problem whose solution is technically and politically more complicated because of the intricacies of health costs.

Bush was using some of his budget cuts to funnel billions to White House priorities.

Defense and domestic security would both see healthy growth, as would select education, public housing, space and other programs. He would also create tax breaks totaling $74 billion over the next decade to encourage low-income people to buy health insurance.

Even so, the budget provided ample evidence that deficits were limiting his agenda.

Bush's proposed 4.8 percent increase for the Pentagon would bring its budget next year to $419.3 billion, excluding Iraq war costs. Yet that was $3.4 billion less than he projected for 2006 just a year ago, with weapons procurement among the leading areas feeling the crunch.

He was seeking increases for perennial favorites like veterans health care, aid to low-income school districts, special education -- but all dramatically less than he proposed last year.

Even his tax-cutting agenda was under the gun and had little new. Of the $1.4 trillion in 10-year tax cuts, more than $1.1 trillion was his oft-repeated call to make his 2001 and 2003 tax cuts permanent.