Bush budget sets 2009 to halve deficit

WASHINGTON -- President Bush's $2.4 trillion budget for 2005 would ease away from tax breaks for energy and business favored by Republicans while cutting spending on programs from environment to community development, GOP officials said Saturday.

Bush's election-year fiscal plan, which he plans to ship to Congress on Monday, also envisions cutting spending on agriculture, natural resources and energy, said the officials, who spoke on condition of anonymity. Further reflecting the pressures mounting federal deficits have heaped on him, his plan will edge only slightly toward the extra highway spending many members of both parties are demanding, said the officials.

Included is a smaller package of tax breaks for energy production than the $23 billion he supported last year. One official said Bush wants the energy tax cuts to cost less than $8 billion.

The president's budget, already known to predict an unprecedented $521 billion deficit this year, projects the red ink will fall to $363 billion next year, the officials said.

In 2009, when Bush has pledged to cut the shortfall in half, it would be a projected $237 billion. In Philadelphia Saturday to address GOP lawmakers gathered there, Bush said cutting the red ink in half is an "important goal."

The largest deficit on record in dollar terms was last year's $375 billion. The soaring shortfalls and spending have angered conservative Republicans and prompted them to pressure Bush produce a budget that takes clear, strong steps toward controlling spending and federal shortfalls.

In his remarks to lawmakers, Bush stressed the austerity he said his fiscal blueprint would impose.

"You spend, I propose," he said, acknowledging the division of power between the executive and legislative branches. "Together we're responsible. And this is going to be a challenging year for making sure we spend the people's money wisely."

GOP aides said those remarks echoed similar, earlier comments at the three-day meeting by White House budget director Joshua Bolten. They said the statements seemed to hint that the administration was willing to negotiate on the deeper spending cuts some Republicans want.

Long-term pressure

Democrats scoff that Bush has been anything but a fiscally responsible leader. Halving the deficit in five years masks the far more serious longer-term pressures the budget will face from his plan to make earlier tax cuts permanent or from the looming retirement of the baby boom generation, they said.

"He's not leveling with the American people how serious this thing is," said Sen. Kent Conrad of North Dakota, top Democrat on the Senate Budget Committee.

Bush's fiscal blueprint will propose letting annual spending controlled by Congress grow by 3.9 percent, from $787 billion to $818 billion next year, the officials said. Those figures exclude both the extra $87 billion approved last year for wars in Iraq and Afghanistan and a new request for those operations the administration says it expects to make early next year.

White House officials have already said that within that total, defense and domestic security would get large increases and everything else would be held to growth of 0.5 percent. That is less than the rate of inflation.

Foreign aid, education and job training would also be allowed to grow, the officials said. But agriculture, natural resources, environment, energy and community development would all be cut from this year's levels, the officials said.

Officials said Bush will not propose extending a law temporarily letting companies take faster write-offs for the costs of equipment they buy. That tax break, favored by the business community, is due to expire at year's end.

"The budget will reflect the administration's view that this tax relief was designed to provide the help the economy needed, where it needed it most and when it needed it most," said an administration official.

The blueprint will also seek $256 billion over six years for highways and mass transit, an official said. Bush proposed $247 billion last year, but the GOP-run House and Senate have both shown support for well over $300 billion.

Money for that spending comes from federal fuel taxes, and Bush told lawmakers he would not accept higher gasoline levies or let general revenues be used to pay for added highway spending, one participant said. Bolten said the fight over highway spending will be the year's first major test of fiscal discipline, the official said.

According to GOP officials, Bush's budget will also propose $23 billion for one year only to keep growing numbers of Americans from having to pay the alternative minimum tax. That is short of the hundreds of billions needed to fix the problem over the longer term. That tax was designed to prevent wealthy people from avoiding taxes, but inflation is forcing more middle-income people to face that levy.