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.

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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

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

Highlights:

• Reduces spending on commodity programs by $1 billion. Seeks to cut payments to farmers by 5% and impose stricter limits on payments, reducing the annual ceiling from $360,000 to $250,000 and closing loopholes that enable big rice and cotton operations to get payments well beyond the limits.
• Requires sugar producers to pay a 1.2% marketing assessment and dairy producers to pay an assessment of 3 cents per hundredweight of milk.
• Cuts crop insurance subsidies and requires producers to buy crop insurance.
• The Bush administration is proposing farm payment reforms that were rejected last year by Congress. However, such payments represent a fraction of the department's spending.
• The department's major expense is for the mandatory food and nutrition programs, where spending would go up as a record 30.9 million children receive free or reduced-price meals through the school lunch program, an increase of about 700,000 children.
• Still, the administration is again seeking to take food stamps away from an estimated 300,000 people who qualify because they get other noncash government assistance.

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

Highlights:

• Seeks more than $500 million for the National Institute of Standards and Technology for nanotechnology, quantum information science, neutron research and other components of the American Competitiveness Initiative President Bush announced in his State of the Union address. The venture is aimed at promoting U.S. innovation to ensure the country remains globally competitive, especially given intense competition from China and India.
• Recommends that the U.S. Patent and Trade Office keep the roughly $1.8 billion in fees it collects and use it to reduce application processing time, hire additional examiners and take other steps to improve efficiency.
• Provides $3.6 billion to the National Oceanic and Atmospheric Administration, including money for the U.S. tsunami warning system.
• Provides $18 million to the National Telecommunications and Information Agency, in part to help consumers make the switch from an analog to digital TV system.
• Eliminates the Advanced Technology Program that provided grants to businesses to help develop new technologies for commercial use. Budget also would terminate the Public Telecommunications Facilities, Planning and Construction program, saying it duplicates other grant programs that support the building of public telecommunications networks.
• "This administration is determined to continue providing American entrepreneurs and workers with the tools they need to fuel our economy while also reining in federal spending," said Commerce Secretary Carlos Gutierrez.

DEPARTMENT OF DEFENSE

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

Highlights:

• Includes $50 billion for the wars in Iraq and Afghanistan, compared with an estimated $125 billion that was spent in 2006 for those wars and for hurricane relief in the U.S. The Pentagon is expected to request more money for the wars as the year goes on.
• Increases spending on other military programs by 7%, to $439.3 billion.
• Boosts spending to nearly $2 billion on unmanned aircraft and ground vehicles, which are being used extensively in the war.
• Significantly increases spending on special operations forces, adding thousands of new Army Rangers and Navy SEALs, and creating a new Marine special operations force.
• Provides nearly $6 billion for new armored humvees, protective armor, trucks, communications gear and night-vision equipment for the Army.
• Cancels a tanker supply ship program to save $4.4 billion over the next five years.
• Cancels the Aerial Common Sensor reconnaissance aircraft, for a saving of about $314 million in 2007.
• Eliminates the alternative engine for the Joint Strike Fighter aircraft and restructures the refueling tanker aircraft program to save nearly $900 million through 2011.

DEPARTMENT OF EDUCATION

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

Highlights:

• Eliminates 42 programs, including money for the arts, technology, parent-resource centers and drug-free schools. Of the 141 programs that Bush wants to eliminate or cut across the government, almost one-third would be in education, accounting for almost $3.5 billion.
• Creates a $100 million program to give private-school vouchers or expand tutoring for students who attend chronically poor-performing public schools.
• Spends $12.7 billion on poverty aid to school districts, known as Title I funding, the largest federal education program. Notably, Bush is proposing no new money for the program, although Title I spending would still be up 45% since he took office.
• Allocates $10.7 billion to educational help for children with disabilities, an increase of $100 million, or 1%, over current spending.
• Revives a $1.5 billion plan to add academic help in high school and expand the No Child Left Behind law by requiring two additional years of testing in high school. Congress never really considered the program this year because it would be funded primarily by erasing the government's vocational education program.
• The real cuts to the education budget seem high because of one-time changes that inflated the 2006 budget, such as emergency aid to schools hit by hurricanes. Mandatory spending alone is expected to drop by $22 billion, but that's mainly because of different assumptions about interest rates and consolidated loans for college students borrowing money.
• The upshot is that discretionary spending would be $54.4 billion, a cut of 6.4%.

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

Highlights:

• Proposes $4.1 billion, an increase of $505 million, for cutting-edge scientific research as part of a 10-year program to double research into such areas as hydrogen fuels, super computers and energy efficient lighting. Also proposes $298 million, a 70% increase, for research into alternative fuels such as ethanol and biodiesel as well as solar power.
• Proposes $250 million as a downpayment on multiyear program to resume commercial nuclear fuel reprocessing, abandoned in the 1970s. The aim is to reduce volumes of waste from commercial power reactors and develop an international program to control civilian nuclear material. Also seeks $544 million, slightly more than this year but less than what was spent in 2005, to continue work licensing a proposed nuclear waste dump at Yucca Mountain Nevada.
• Provides $84 million, an increase of $60 million, to deploy radiation detection equipment at border points and foreign seaports. Overall spending for nuclear weapons programs proposed at $9.3 billion, an increase of $200 million. Spending for weapons complex environmental cleanup is proposed at $5.8 billion, a 12% decline over fiscal 2006.
• As in past years, roughly two-thirds of the department's budget goes for activities related to maintaining the U.S. nuclear stockpile and the environmental cleanup left over from the Cold War years at weapons facilities.

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

Highlights:

• Cuts low-interest loans to states for water quality protection projects by 22%. The cut would decrease funding to $688 million for treating wastewater, reducing pollution from nonspecific sources and managing watersheds and estuaries.
• Increases loans for drinking water improvements by $5 million, to $842 million.
• Increases to $50 million, from last year's $7 million, grants to promote cleaner-burning diesel engines, a major source of fine particle pollution blamed for a variety of respiratory illnesses.
• Proposes $1.3 billion, a slight increase of $28 million, for Superfund toxic waste cleanup program, the one that's used when the agency has been unable to pin the costs on a polluter.

DEPARTMENT OF THE INTERIOR
Spending: $9.1 billion
Percentage Change From 2006: -2.4%

Highlights:

• Cuts $312 million from the Office of Surface Mining program to reclaim abandoned mines, because of the expiration of coal mining fees next June. The department says more than $3 billion in health and safety work under the program remains undone.
• Cuts the National Park Service budget by $89 million, to $2.484 billion, in what officials call a return to "sustainable levels" after a five-year maintenance initiative.
• Cuts $35 million from the budget for the Bureau of Land Management, which handles permits for oil and gas drilling. That would decrease the agency's budget to $2.834 billion.

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Spending: $697.7 billion
Percentage Change From 2006: +3.1%
Mandatory Spending: $627.8 billion

Highlights:

• Cuts projected Medicare spending by $35.9 billion over five years. Without legislative changes, the federal health insurance program for the elderly and disabled would grow at an annual rate of 8.1%. Under the president's proposal, Medicare spending would grow at a rate of 7.7%.
• Cuts the Administration for Children and Families budget by about $1.4 billion to $12.3 billion, mainly through the elimination of block grants that pay for job training, housing and health programs intended to reduce poverty. The administration says the block grant program lacks performance measurements and does not award grants on a competitive basis.
• Flat funding of $28.4 billion for the National Institutes of Health, which conducts health research to improve the detection and treatment of disease. Cuts spending at the Centers for Disease Control and Prevention by about $160 million.
• Health and Human Services Secretary Mike Leavitt: "Hard choices had to be made and this budget reflects our effort to make those in the wisest way."

DEPARTMENT OF HOMELAND SECURITY
Spending: $31 billion
Percentage Change From 2006: +9.8%
Mandatory Spending: $98 million

Highlights:

• Boosts FEMA spending by $363 million — including $150 million in state and local grants to help authorities avoid flooding or damage caused by other disasters, in response to Hurricane Katrina. Adds 6,000 illegal immigration detention beds and provides 1,500 new agents to patrol the nation's border. The 2004 intelligence reform law requires that 2,000 border patrol agents be added annually.
• Doubles airline security fees to $5 for a one-way flight to collect $1.3 billion in additional revenues, echoing a similar proposal that Congress rejected last year.
• Provides $935 million for the 20-year Deepwater program to modernize Coast Guard boats and planes, and $838 million in counterterror grants for the highest risk cities and regions.
• The budget reflects Homeland Security's crackdown on U.S. borders through new agents and technology to detect illegal immigrants, and detention beds until they can be returned home. It also asks for $247 million to fund President Bush's proposed guest worker program granting temporary visas to immigrants seeking employment in the U.S.
• The government provided $87 billion to victims of Hurricanes Katrina and Rita last year, but the department's budget gives little new money to disaster relief. It triples grants to help residents and businesses in flood plains, and provides a 9% increase to the nation's disaster relief fund for emergencies.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Spending: $33.5 billion
Percentage Change From 2006: -29.9%

Highlights:

• Consolidates several community development initiatives into the existing Community Development Block Grant program, and cuts it by $975 million to $3 billion. Consolidated programs include one to redevelop polluted areas and one to develop rural housing.
• Allows the Federal Housing Administration to base mortgage insurance premiums on the credit ratings of home buyers. The number of FHA loans has been dropping for three years, in part because low interest rates have enabled home buyers to get less expensive deals in the private market.
• Federal Housing Commissioner Brian Montgomery said flexible premiums would enable HUD to offer insurance to more home buyers — those with both good and bad credit. With the changes, HUD projects a 50% increase in FHA loan guarantees next year.
• Contains no new housing money for victims of Hurricane Katrina. Congress recently approved about $11.5 billion in housing assistance for hurricane victims. That money was added to the 2006 budget, which explains most of the 30% cut in spending for fiscal 2007.

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

Highlights:

• The FBI budget would increase by 6.5%, to $6 billion. The bureau's proposed budget is 87% higher than it was in 2001.
• The proposed increase reflects the FBI's top priorities since the Sept. 11, 2001, attacks — fighting terrorism and foreign espionage. But unlike past years, the money would be spent on facilities and computer systems, not agents.
• The Drug Enforcement Administration would see a 4% increase, to $1.7 billion, mainly devoted to expanding missions in South America and Afghanistan. The High-Intensity Drug Trafficking Area Program, popular with local law enforcement, would be cut by nearly 8% to $208 million and transferred from the White House drug policy office to the Justice Department.
• Project Safe Neighborhoods, an administration program targeting gun crimes, would get $395 million, a jump of 64% over 2006, and a broader mission focusing on gang violence.
• The Bureau of Alcohol, Tobacco, Firearms and Explosives would receive $860 million, a drop of nearly 6%. But the administration estimates the agency would get an additional $120 million from a new fee paid by holders of permits to purchase and handle explosives.
• Calling them ineffective, the administration proposes to end several grant programs to state and local law enforcement, to save $1.1 billion.
• These programs include the State Criminal Alien Assistance Program, which helps states defray the cost of jailing illegal immigrants and grants focused on juvenile offenders. Congress has resisted similar proposals in previous years.

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

Highlights:

• Provides $772 million to the Occupational Safety and Health Administration and the Mine Safety and Health Administration to strengthen work place safety, up from $749 million in the president's 2006 budget. The administration wants Congress to pass legislation that would boost penalties for mine safety violations from $60,000 to $220,000.
• Allocates $125 million in grants to prepare workers for jobs in high growth industries. The money would train an estimated 50,000 workers.
• Provides $8 million to help update and improve the accuracy of the Bureau of Labor Statistics' Consumer Price Index, a closely watched inflation gauge.
• Seeks legislative changes to prevent improper payments of unemployment benefits. Almost $3 billion in benefits were paid to ineligible workers in 2005, the administration said.
• Proposes changes to the Federal Employees' Compensation Act, which provides benefits to federal workers for occupational illness, injury or death, that would save the government $592 million over 10 years.

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

Highlights:

• Spending increase is the largest for an agency or branch of government. Asks for $115 million to train Americans in languages deemed crucial to fight terrorism.
• Reprises last year's request for $3 billion for the Millennium Challenge Corp., a Bush administration initiative meant to reward good governance and democratic commitments among developing nations, but which has been viewed with skepticism in Congress. Last year, lawmakers gave the program only $1.7 billion.
• Requests $4 billion for a global program to fight HIV/AIDS, more than $740 million above last year, plus $225 million to combat malaria and $210 million to fight bird-flu abroad.
• Seeks $770 million for Iraq, and more than $470 million for a cultural exchange program focused on the Muslim world.
• The budget reflects Secretary of State Condoleezza Rice's plan to place greater emphasis on humanitarian programs and improve management of the Bush administration's $18 billion foreign aid programs. It would fund programs that emphasize up-by-the-bootstraps development overseas, although it also preserves traditional assistance such as the more than $2 billion given annually to Israel. There is an $80 million request for grants to private groups promoting democracy.

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

Highlights:

• Spends far less for air traffic control equipment than Congress and President Bush agreed to in the 4-year aviation budget plan signed into law in 2003. Then, Bush agreed to spend $3.11 billion, but he asked for $607 million less than that for next year, a 20% decrease. Airports would receive $340 million less next year than this year.
• Spends about a third less for airport buildings and equipment than Bush and the Congress approved in 2003. Originally, they'd agreed to spend $3.7 billion. Bush wants to spend $2.73 billion next year, a 32% cut from the 2003 agreement and a slight reduction from this year's spending.
• Gives Amtrak $900 million to "enable Amtrak's new management team to keep the trains running and act on its mandate to reshape the company." In the 2006 budget, Bush offered no subsidy for the railroad, but Congress decided to grant Amtrak $1.3 billion.

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

Highlights:

• The biggest chunk of the department's mandatory spending — roughly $441 billion — goes to paying interest on the national debt, including obligations related to Social Security. The total interest includes $247 billion in payments to investors on debt held by the public.
• The bulk of the department's $11.6 billion in discretionary spending goes to the Internal Revenue Service, which would receive $10.6 billion, slightly more than last year's request. A portion of the money would modernize IRS technology to improve electronic tax-filing options for taxpayers, replace antiquated taxpayer databases and make other changes aimed at bolstering efficiency. IRS also will use some of its funds to catch tax scofflaws and crack down on dubious tax schemes.
• The Financial Crimes Enforcement Network, dubbed FinCen, would receive $90 million, up from a request of $73 million last year. The agency is responsible for making sure the nation's financial system isn't abused by terrorist financiers, drug dealers, and other criminals.
• "The president's proposed budget for fiscal year 2007 is a budget that works to ensure that future generations of Americans will have the opportunity to live in a nation that is more prosperous and more secure," said Treasury Secretary John Snow.

DEPARTMENT OF VETERANS AFFAIRS
Spending: $77.7 billion
Percentage Change From 2006: +10.4%
Mandatory Spending: $42 billion

Highlights:

• Proposes again to charge a $250 health care enrollment fee to veterans whose incomes are above certain levels and who have no illnesses or injuries that resulted from their military service. Congress previously rejected a similar proposal.
• For the same veterans, increases co-payments for a 30-day supply of prescription drugs from $8 to $15. Similar or identical proposals have been rejected repeatedly by Congress.
• Raises spending on medical care from $28.7 billion to about $31.5 billion.
• Anticipates VA will care for more than 100,000 Iraq and Afghanistan veterans in 2007.
• Estimates 3.7 million veterans and beneficiaries will receive about $38 million in benefits.

NATIONAL AERONAUTICS AND SPACE AGENCY
Spending: $16.8 billion
Percentage Change From 2006: +1%

Highlights:

• Budget anticipates continued operation of the Space Shuttle through 2010 with 16 flights to complete the International Space Station and one flight to service the Hubble Telescope.
• Budget increases spending for solar system exploration, Earth-Sun science, exploring systems and technology. Decreases are set for education, business partnerships.
• Agency plans to reduce the number of full time workers from 18,410 to 17,979.