Bush budget proposes new tax cuts, high deficits

WASHINGTON -- President Bush will send Congress a $2.23 trillion spending plan today featuring new tax cuts to boost the economy, a conservative tilt to major social programs and record deficits for the next two years -- shortfalls that Democrats blame on Bush's tax cuts.

White House budget officials said Sunday the president's tax and spending blueprint, complete with dozens of agency briefings, will roll out as scheduled despite Saturday's space shuttle disaster.

Bush's budget outline for the 2004 fiscal year, which begins Oct. 1, is required by law to be sent to Congress the first Monday in February. The numbers and spending priorities undoubtedly will change somewhat over the next several months as Congress acts on his request.

The Columbia tragedy certainly will prompt added scrutiny to the president's spending proposal for NASA, which has come under heavy criticism from Congress in recent years because of cost overruns for the orbiting space station and other programs.

Topped $2 trillion

Total government spending first topped $2 trillion in Bush's first budget in 2002, 15 years after Ronald Reagan gave the country its first $1 trillion federal budget.

Bush's new spending plan, which will set off months of congressional debate, projects that deficits will hit an all-time high in dollar terms -- $307 billion for the current fiscal year and $304 billion for 2004, with both years surpassing the previous record of $290 billion set by Bush's father in 1992.

The administration says, however, that this year's deficit will be just 2.8 percent of the overall $10.5 trillion U.S. economy -- far below the 4.7 percent level hit in 1992 and an amount acceptable for an economy struggling to emerge from recession.

But Democrats charge that Bush's $1.35 trillion, 10-year tax cut in 2001 and his new request for another $670 billion in tax cuts as part of an economic stimulus program will put the budget on a dangerous downward slide that will rob Social Security of the surpluses it needs to prepare for the retirement of the baby boomers.

"The president is pursuing a policy that will dramatically increase our deficits, expand our debts and accelerate our economic decline," said Sen. Kent Conrad, the top Democrat on the Senate Budget Committee.

The president, mindful of the political price his father paid because of his handling of the economy after winning the Persian Gulf War in 1991 -- he lost the White House in 1992 -- declared in his State of the Union address last week that boosting the economy was his No. 1 goal. He urged Congress to vote without delay for his new stimulus plan.

The tax cut part of his budget, which Bush previewed in a Jan. 7 speech, has run into heavy opposition, especially his idea of eliminating double taxation of investors' stock dividends. That would carry a $364 billion, 10-year price tag, more than half the $674 billion cost of the stimulus plan. Democrats charge the elimination of dividend taxes would provide no boost to the economy this year and would drive government deficits higher in coming years.

The tax plan also would accelerate into this year the rate cuts and $400 boost in the child tax credit that the 2001 tax legislation would have phased in over seven years.

Bush's budget also will seek to overhaul some of the government's biggest social programs. It will propose to spend $400 billion over the next decade to reform Medicare, which provides health care to nearly 40 million elderly Americans, and to offer for the first time a Medicare drug benefit.

Bush also will seek to overhaul Medicaid, the joint federal-state program that provides health care to the poor, offering states $12.7 billion over the next seven years to implement reforms in the program. The administration's budget also wants to change Head Start, the popular program to help poor children prepare for school.

Critics contend that Bush's Medicare proposal is unfair, because it is expected to provide drug benefits only to seniors willing to join managed care programs. They say his proposal on Medicaid would force states to limit the number of poor people they could help.

Other priorities in the Bush budget will be defense, slated to get a 4.4 percent increase to $399.1 billion after rising 14.5 percent this year, the biggest jump since 1982. It features money for Bush's missile defense program and for increased ship building but does not include the cost of fighting a war with Iraq. Pentagon officials have said a special request for that would come later.

Domestic security is another Bush priority, expected to get $41.3 billion in the new budget, up 9.5 percent from the current year. That represents one of the biggest single increases as the administration works to complete the massive government reorganization entailed in creation of the new Homeland Security Department.

While providing increases in defense and homeland security and other Bush priorities, the budget will either freeze or allow only small increases in numerous domestic programs. Affected interest groups and their allies in Congress are certain to find such a budget constraint objectionable.

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On the Net: Congressional Budget Office: http://www.cbo.gov

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