Bush Enlists Budget Cuts to Curb Deficit

Except for Defense and Homeland Security, Domestic Spending May Shrink About 0.7% 

JOHN D. MCKINNON and JACKIE CALMES / Wall Street Journal 7feb2005

WASHINGTON — The budget President Bush sends to Congress today relies much more than his previous budgets did on deep cuts in spending to hold down the federal deficit — and in fact will show a decrease in domestic spending, outside defense and homeland-security programs, of about 0.7%.

Mr. Bush's budget will argue that government services will be maintained — and might even be increased — through greater efficiency produced by consolidating similar programs and cutting overhead costs, much as merging companies often promise.

"You'll see more of it in this budget than in the past, and our intention is to do more in [future budgets] than in 2006," says Joel Kaplan, White House deputy budget director. "Our focus is on results."

But the proposed Bush consolidations in job training as well as community development, college loans, local law-enforcement grants, education and agriculture research are certain to spur controversy in Congress. The White House also is proposing to save money by squeezing Medicaid, the federal-state health-insurance program for low-income people, and taking aim at some big weapons-procurement programs no longer seen as needed.

In the budget for fiscal 2006, which begins Oct. 1, the White House will propose combining four Labor Department jobs programs and reduce spending to $3.9 billion from the $4.1 billion appropriated for the current fiscal year. The programs cover adults, youth and dislocated workers, as well as employment-service centers.

The White House also will propose allowing governors to combine federal-funding streams that go to five other programs that serve many of the same groups through the Labor, Education and Agriculture departments. For these programs, Mr. Bush proposes to spend $3.6 billion in 2006, down from $3.9 billion in 2005.

Because the current approach to job training is fragmented and restrained by rules, much of it has been "all process and no results," says Emily Stover DeRocco, assistant secretary of labor for employment and training.

Some job-training advocates privately concede that the programs could benefit from streamlining, but they vigorously oppose the administration's planned spending cuts.

White House officials say combining the programs and relaxing rules will help Mr. Bush make good on his pledge to double to 400,000 the number of workers being trained with federal help. The biggest effect would come from plowing $300 million that the White House says it will save in administrative costs into training for about 100,000 more workers.

Mr. Bush also wants Congress to set accountability standards that would set a goal of placement of all workers receiving federally funded training by 2015. Officials say they hope that new flexible rules will encourage states and local governments to design training programs that are more tailored to the needs of local employers.

Opponents charge that it doesn't make sense to expect so much more from so much less money. "We just don't think it's realistic," said Chuck Loveless, director of legislation for the American Federation of State, County and Municipal Employees. The public-employee union resisted the administration's earlier, less-ambitious proposals to consolidate job training programs that was passed by the House, but not the Senate.

Other critics claim the administration's changes could hurt some groups that are the focus of current federal programs, such as dislocated workers. "Anytime you have consolidation, that targeting could go by the wayside," said Jim Hermes, a senior legislative associate for the American Association of Community Colleges.

That is especially troubling at a time when outsourcing is causing disruption for U.S. workers, Mr. Loveless added.

An outline of the White House plan says that "drops in participant levels for targeted populations such as individuals with disabilities will not be allowed."

The Bush administration has pledged to reduce the federal deficit to about 2.2% of the nation's economy by 2009, compared with the 4.5% of gross domestic product projected last year for fiscal 2004. The budget will forecast a deficit of about $427 billion for fiscal 2005, up from the $412 billion shortfall recorded in 2004.

The president's deficit-reduction goal is ambitious, given the continued cost of the Iraq war, which won't be reflected in today's budget documents. The president also is seeking to make permanent the tax cuts that, along with a recession and the war on terrorism, turned the budget into deficit from surplus during his first term.

In an interview with "Fox News Sunday," Vice President Cheney said the 2006 budget would be "the tightest budget that has been submitted since we got here." But he emphasized that the administration, in making its cuts, was looking carefully for "savings" and "better ways to provide these services."

Even some congressional favorites are being targeted. People who have seen budget documents say the president will propose just a 0.7% increase for the National Institutes of Health, to $28.687 billion — a sharp slowdown from recent years. The NIH enjoyed a doubling of its budget in the years 1998-2003, noted Patrick White, director of federal relations at the Association of American Universities. The small increase for 2006 means "we are starting to see an erosion of the research capacity made possible by the doubling," he added.

Meanwhile, the National Science Foundation, whose budget was cut this year, will have much of that restored, with a proposed 2.4% increase for fiscal 2006, to slightly more than $5.6 billion.

Democrats predict tough going for many of these proposals, despite Republican control of both the House and Senate. Even some Republicans express private doubt about the most ambitious of Mr. Bush's plans.

"This is the one case where the president really will achieve bipartisanship — the opposition to this will be broadly bipartisan," said Rep. Barney Frank of Massachusetts, the top Democrat on the House Financial Services Committee. He accuses the administration of seeking to gut community-development programs with its proposal, which would consolidate several different programs, including the Community Development Block Grant program, and move them into the Commerce Department. Democratic critics believe the combined programs also will be cut substantially; White House officials say their consolidation of the programs would allow the government to focus its resources on the poorest communities.

Administration aides say they believe that because of the deficit and an increase in the number of conservatives in Congress the mood on Capitol Hill is changing, and more lawmakers are willing to vote against certain programs.

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