Bush pushes cuts in $2.77 trillion budget proposal

President Bush yesterday sent Congress a $2.77 trillion budget proposal that would increase defense spending by nearly 7 percent, create new tax credits for health care and make permanent the tax cuts that he pushed through in his first term.

The plan also calls for slashing about $15 billion from 141 programs in nine of 15 Cabinet agencies, including the Education and Justice departments, and seeks additional savings by reducing the growth of spending in Medicare, the health care program for the elderly and disabled, by $35.9 billion over five years.

Under the fiscal 2007 plan, which begins Oct. 1, the administration boosts total spending from this year by a modest 2.3 percent, and promises to cut in half this year’s projected record deficit of $423 billion by 2009.

“My administration has responded to major economic challenges by following this vital principle: The American economy grows when people are allowed to keep more of what they earn, to save and spend as they see fit,” the president said in a message transmitted with the budget.

The White House said the tax proposals would save taxpayers about $1.7 trillion over the next 10 years, including $1.4 trillion by making permanent tax cuts that expire in 2011. The health care proposal would reduce taxes by about $137 billion in the coming decade.

Democrats criticized the tax cuts, saying they benefit only rich taxpayers and add to federal budget deficits, and Senate Budget Committee Chairman Judd Gregg, New Hampshire Republican, predicted a tough fight over some of the domestic spending cuts.

Senate Minority Leader Harry Reid called the president’s budget blueprint “immoral and irresponsible.”

“The American people have paid the price for the Republican culture of corruption over the past five years, and the president’s budget proposes more of the same,” Mr. Reid said.

“President Bush’s budget continues to put special interests first while making worse the financial pressures confronting American families. This is an immoral and irresponsible approach that does not reflect the values of the American people.”

Said Sen. Max Baucus of Montana, the top Democrat on the Senate Finance Committee: “We’re not doing future generations any favors if we cut taxes in a way that busts the budget.”

But Joshua B. Bolten, director of the Office of Management and Budget, defended making the tax cuts permanent.

“Many of the administration’s critics will argue that we should let the tax relief expire. A tax increase is the wrong prescription, not only for the nation’s economic health, but also for the government’s fiscal health. We are not an undertaxed society,” Mr. Bolten said.

“Those tax cuts are essential toward sustaining the good economic growth we have now. And it’s the people at the bottom end of the income scale who suffer the most when the economy is bad. It’s not rich people who have a hard time when the economy turns down; it’s those who are struggling who have the hardest time,” he said.

The proposal also calls for the expansion of health savings accounts, which let workers save and spend money tax-free for medical needs if the worker purchases a high-deductible health insurance policy.

The administration said the combination of savings accounts and high-deductible health insurance policies gives users more control over health care spending.

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