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Bush Would Boost Defense,
Security In Budget Plan

Social Programs Face Cuts In Proposal for Fiscal 2007;
Worries Over Heating Bills

DEBORAH SOLOMON and JOHN D. MCKINNON / Wall Street Journal 7feb2006


WASHINGTON President Bush submitted a federal budget that proposes to boost spending on defense, homeland security and scientific research, includes no significant restraint on Social Security and contains only modest curbs on Medicare.

In exchange, Mr. Bush would bring the budget knife down on domestic programs other than homeland security, the same small slice of the federal budget that Congress pared this year. The cuts would help Mr. Bush show a shrinking deficit for fiscal 2007, which begins Oct. 1, even though spending would rise 2.3%, or $62 billion, from the current fiscal year. The budget, released yesterday, doesn't propose any new taxes.

Politically, the president may find it tough to persuade Congress to endorse his plan. Much of the squeezing would be of programs aimed at low-income Americans and wouldn't save all that much money in the aggregate. Targeting domestic programs tends to cause political indigestion for lawmakers, who know how easy it is to put a human face on those who feel the impact of budget cuts, particularly in a congressional election year.

In all, Mr. Bush proposes spending $2.77 trillion in fiscal 2007 assuming he needs only $50 billion in supplemental funding for Iraq and Afghanistan, an amount that falls short of current spending. That works out to 20.1% of the gross domestic product, or the total amount of goods and services produced in the U.S. He expects revenue, after some tweaking of the tax code and some new fees, to reach $2.42 trillion, a 5.7% increase from this year. That would bring total revenue to 17.6% of GDP.

The deficit would fall to $354 billion, or 2.6% of GDP but only if Congress accepts all of Mr. Bush's money-saving proposals, which it likely won't, and doesn't add any other spending or tax breaks. The deficit for the current year is expected to be about $423 billion, or 3.2% of GDP.

Spending on Social Security would climb 5.6% to $581 billion next year all of it needed to pay benefits already provided by current law. Spending on the Medicare and Medicaid health-insurance programs for the elderly, disabled and poor would climb 10.4% to $592 billion. Mr. Bush proposes changes to the two programs, but they would save only $3.2 billion next year, and $40.8 billion over five years about 1.2% of the programs' projected five-year spending.

By contrast, annual congressional spending outside of defense and homeland security would be cut below this year's level, cuts that would be magnified by inflation. Much of that money, which constitutes about a sixth of federal spending, is targeted at the poor.

Big Increase for Border Patrol

The $439.3 billion defense budget for fiscal 2007 would be 4.8% more than the current budget and would include billions of dollars for fighting insurgents and other unconventional threats, as well as funding for conventional weapons programs.

Driving the increases are both the need to pay for the wars in Iraq and Afghanistan and a continuing desire to pay for big weapons-modernization programs.

Spending for homeland security combines the government's priorities of fighting terrorism with the new political realities of 2006. The budget requests big increases for border control, in response to the increasingly contentious debate within Mr. Bush's own party over immigration, and a boost in spending on disaster response, following the federal government's poor initial response to Hurricane Katrina.

Mr. Bush also proposes to pump up the budget for the National Science Foundation, the federal agency that provides grants for basic research in colleges and universities. The budget for the foundation would increase 7.9% in fiscal 2007, the first step in a planned doubling of its investments in science and engineering in the next decade. The expansion is part of his "American Competitiveness Initiative," aimed at keeping the U.S. in the lead in technology even as global rivals emerge in Asia and elsewhere.

The initiative also seeks to strengthen math and science education in schools and better prepare workers for high-technology jobs. Mr. Bush is making a special push for alternative-fuel technology. To keep the economy expanding, he also called again for making permanent broad tax cuts passed in his first term that are scheduled to expire.

In a two-page message at the beginning of the budget, Mr. Bush wrote, "My administration has focused the nation's resources on our highest priority: protecting our citizens and our homeland." As for other domestic spending, he stressed his desire "to bring greater accountability and transparency to the budget process" with "firm spending limits" that will help make sure "public funds are used for the best purposes with the broadest benefits."

The president would cut funding for some domestic programs and outright eliminate others, such as the Commodity Supplemental Food Program, a $111 million-a-year program that provides monthly bundles of cheese, cereal, peanut butter and other nutritional staples to 400,000 low-income elderly people.

Some would receive increases, but not enough to offset inflation. For instance, the budget gives $2 billion to the Low Income Home Energy Assistance program, which provides cash to low-income people for their heating bills. That is close to the same amount as initially appropriated for the program for 2006.

But nationwide, home heating costs are averaging 31% higher this winter than a year ago, because of rising natural-gas prices. Indeed, Congress recently allocated an extra $1 billion to cover expected high heating bills. Bush administration officials say they also are seeking other funds for 2007 that could be used to help the hardest-hit areas.

For Erin O'Conner, a single mother of four in St. Louis who is trying to start her own cleaning service, higher natural-gas prices are taking a big bite. Ms. O'Conner, who is 42 years old, said her monthly income averages about $700. She expects to get another $600 this winter in federal assistance a huge help, she said. Still, her December heating bill alone was $300.

"It doesn't seem like I'm using more gas, but the bills are so much higher," she said. Ms. O'Conner said she has taken part-time cleaning jobs to supplement her income and has kept the thermostat at 70 degrees, but she worries her heat would be cut off without enough federal aid.

As anticipated, the president's proposal also would slice 1.8% from the budget for the Department of Housing and Urban Development. It would cut 26% from a program aimed at the low-income elderly and known as Section 202, and half the funding for a program known as Section 811, which is for low-income people with disabilities.

A Dilemma

Such figures could pose a dilemma for politicians in both parties. "Overall, we're concerned that some of these cuts are really beginning to bite," said Missouri Republican Sen. Christopher "Kit" Bond, chairman of the appropriations committee that oversees housing. The White House budget office, he said, "sits in some isolated cocoon and comes forward with proposals that we don't think make any sense."

White House budget director Joshua Bolten challenged that notion. "When we're in the midst of major national priorities disaster, war, and so on it's only prudent that the government tighten its belt elsewhere," he told reporters. "There's still plenty of opportunities for savings...we believe, without fundamentally undermining the proper functions of a federal government."

Claude Allen, Bush's domestic policy adviser, said the administration has substantially increased funding for "core programs" that effectively deliver help to low-income people. In those areas, "the safety net is tight and strong," he said. The administration is targeting programs it deems ineffective, not shying away from programs just because they serve poor people, he said.

Some in Mr. Bush's conservative base complained he isn't tightening the federal belt enough. "Federal spending has grown twice as fast under President Bush as under President Clinton," said Brian Riedl, a budget analyst at the Heritage Foundation, a conservative think tank, pointing to such Bush-backed initiatives as the Medicare prescription drug bill. The White House says the terrorist attacks of Sept. 11, 2001, and subsequent wars in Afghanistan and Iraq justified much of the added spending.

Democrats took the opposite view. "After creating record deficits and debt with his budget-busting tax breaks, the president is asking our seniors, our students and our families to clean up his fiscal mess with painful cuts in health care and student aid," said Senate Minority Leader Harry Reid of Nevada.

Further Squeezes

For politicians of both parties, the Washington debate, centering on acronyms and back-and-forth sound bites, will play out quite differently on the local level, where governments and residents are wrestling with the effects of changes to Medicaid, job-training programs and other federal programs.

Congress recently approved money-saving changes to the state-federal Medicaid program and gave states flexibility to ask the poor to pay a bigger share of their own health tabs, for instance. The new budget's further squeeze on Medicaid would mean more adjustments.

In Missouri, for instance, changes have reduced state and federal spending on Medicaid by $626 million from what it otherwise would have been, to about $5.3 billion for the current fiscal year. Using flexibility allowed under federal law, the state sought savings by lowering the income thresholds for Medicaid eligibility to 22% of the federal poverty line this year, from a level last year of 75%. That means that to qualify for Medicaid in Missouri, adults in a family of three can earn no more than $3,504, excluding some child-care costs. Last year, the figure was $12,067. (Children often remain eligible.) As a result, about 74,000 low-income adults are losing health insurance.

One is Kristen Alliegro, 32, a single mother of two who said she earns $600 to $800 a month from two part-time jobs. She said she has been on Medicaid since 2003, when she lost a full-time job at Bank of America. After four months of looking for a job that paid as much, she went back to school to earn a bachelor's degree in psychology. Student loans and scholarships aren't enough to cover an $800 monthly mortgage bill, a $300-a-month heating bill and the cost of diapers and fuel, she said.

Her sons, who are 2 and 5 years old, will continue to be covered under federal-state programs for children. She said the prospect of losing her own government-provided health insurance is forcing her to consider a choice between quitting work altogether so she can stay covered or continuing to work and losing her insurance. While she could qualify for both Medicaid and welfare by quitting, she said, "I'd lose my house, I'd lose my car, and I'd lose my sense of esteem and self-worth. Once you're there, there's no way out."

Another area being cut is the Department of Health and Human Services' Community Services Block Grant program, which for decades has been used by Washington to fund state and local antipoverty efforts. Funding for that program has been steadily reduced since its 2002 peak. Last year, Mr. Bush proposed wiping it out altogether, though Congress appropriated about $630 million.

In his new budget, the president, again, proposes to eliminate the program. Mr. Allen, the White House domestic policy adviser, said federal officials can't effectively track the program's results, so the administration decided to focus resources on other programs.

Jackie Calmes contributed to this article.


Bush's 2007 Budget Proposal

Wall Street Journal 7feb2006


A broader view of what's growing and shrinking in Bush's 2007 proposal, in budgetary authority

Sources: Office of Management and Budget, AP *Includes miscellaneous, undistributed offsetting receipts


A look at how the federal government is counting on bringing in revenue, and how it plans to spend it in fiscal 2007. All figures in billions unless noted.


By assuming that federal spending will shrink as a share of the economy after five years of increases the White House projects the federal budget deficit (left) to drop sharply over the decade. Separately, with steady reductions in corporate taxes (right), companies pay a decreasing portion of the taxes Washington collects.


The president's defense budget (left) includes billions of dollars of spending to fight unconventional threats like insurgents but defers the big decisions on countervailing cuts to major weapons systems that most senior defense officials acknowledge will eventually be necessary. Spending on health care (right) is projected to continue as a growing part of the economy.


While the White House requests funding annually, the amounts Congress appropriates don't always match. Here's how several projects fared over the past few years. *Program realigned to reflect new initiatives

Agency Snapshots

Spending: $96.4 billion
Percentage Change From 2006: +0.2%
Mandatory Spending: $76.7 billion



Spending: $6.3 billion
Percentage Change From 2006: -2.2%
Mandatory Spending: $167 million



Spending: $491.3 billion
Percentage Change From 2006: -8.7%
Mandatory Spending: $2 billion



Spending: $63.4 billion
Percentage Change From 2006: -28.5%
Mandatory Spending: $9 billion


Spending: $20.7 billion
Percentage Change From 2006: -1.8%


Spending: $7.2 billion
Percentage Change From 2006: -4.9%


Spending: $9.1 billion
Percentage Change From 2006: -2.4%


Spending: $697.7 billion
Percentage Change From 2006: +3.1%
Mandatory Spending: $627.8 billion


Spending: $31 billion
Percentage Change From 2006: +9.8%
Mandatory Spending: $98 million


Spending: $33.5 billion
Percentage Change From 2006: -29.9%


Spending: $22.5 billion
Percentage Change From 2006: -0.6%
Mandatory Spending: $3 billion


Spending: $54 billion
Percentage Change From 2006: +5.5%
Mandatory Spending: $43.2 billion


Spending: $33 billion
Percentage Change From 2006: +13.1%


Spending: $67.7 billion
Percentage Change From 2006: +4.9%
Mandatory Spending: $54.5 billion


Spending: $495.8 billion
Percentage Change From 2006: +9.2%
Mandatory Spending: $484.2 billion


Spending: $77.7 billion
Percentage Change From 2006: +10.4%
Mandatory Spending: $42 billion


Spending: $16.8 billion
Percentage Change From 2006: +1%


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