Tuesday, February 6, 2007

President Bush yesterday sent Congress a $2.9 trillion budget for fiscal 2008 with more than $620 billion for defense next year and more than $93 billion for the Iraq war for the rest of 2007 — figures the new majority Democrats on Capitol Hill called “staggering.”

After two years of freezing or cutting basic domestic spending, the White House says it is bowing to Congress by planning a 1 percent increase. But it is also butting heads with Democrats by calling for Mr. Bush’s tax cuts to be made permanent — at a value of $1.2 trillion over 10 years.

“I strongly believe Congress needs to listen to a budget that says no tax increase and a budget that because of fiscal discipline can be balanced within five years,” Mr. Bush said after meeting with his Cabinet yesterday morning.

With Democrats now in control, Mr. Bush’s budget is probably already a dead document.

“I doubt that Democrats will support this budget, and frankly, I will be surprised if Republicans rally around it either,” said House Democrats’ point man on the budget, Rep. John M. Spratt Jr. of South Carolina, chairman of the Budget Committee.

Mr. Spratt, though, said Democrats do share Mr. Bush’s goal of a balanced budget by 2012 — providing at least a common endpoint for negotiations.

The budget shows deficits will hover around $240 billion for 2007 and 2008, decline to $187 billion in 2009 and eventually turn into a surplus in 2012. But the Bush budget counts on revenue, including tax collections from the Alternative Minimum Tax, that both Republicans and Democrats said is unrealistic.

For the first time since the war on terrorism began, Mr. Bush included a prediction of the expected annual cost, so appropriators can take that into consideration when developing their budget.

Rob Portman, director of the Office of Management and Budget, called it a “good-faith effort” designed to show Mr. Bush is ready to work with Congress on an honest budget this year.

But Democrats expressed shock at the size of defense spending — all told, more than $717 billion in new money that was proposed for 2007 and 2008.

“The sums involved in the defense budget requests are staggering,” said House Armed Services Committee Chairman Ike Skelton, Missouri Democrat. Other Democrats said the sizeable spending shows Mr. Bush is not changing his course.

Overall, the budget for fiscal 2008, which begins Oct. 1:

• Projects revenue of $2.662 trillion and spending of $2.902 trillion, for a deficit of $240 billion.

• Spends $410 million to help the Internal Revenue Service collect taxes and tweaks tax rules — which the administration says could help collect $29 billion over 10 years in unpaid taxes.

• Calls for Medicare spending to rise at 6.7 percent annually over the next decade, down from the current projection of 7.4 percent, and for smaller reductions in Medicaid, for savings of $96 billion over five years.

• Pushes back the start date for private accounts in Social Security another two years, to 2012 — a recognition that Congress is unlikely to approve such a program any time soon.

• Includes Mr. Bush’s proposals for boosting alternative fuels to help decrease the use of gasoline, and his new health care proposal, which would amount to a tax cut on most Americans but a tax increase on those with the most generous health insurance plans.

• Calls for slashing 141 programs, which would save $12 billion in 2008.

Mr. Bush won praise from House Majority Leader Steny H. Hoyer, Maryland Democrat, for dropping some of the “gimmickry” he said the White House has used in the past.

In addition to trying to include more war costs this year, Mr. Portman said they also stopped counting on fees that Congress routinely rejects as sources of income, such as higher airport-security fees.

Democrats blasted the reduced spending on Medicare, and promised a fight over Mr. Bush’s call to extend his 2001 and 2003 tax cuts.

“The administration cannot continue to ignore the fact that its tax policies are shortchanging key domestic priorities such as health care, education and the environment, and driving us further into debt,” Mr. Hoyer said.

Republicans on the more liberal side of the party were almost as harsh, with Sen. Olympia J. Snowe of Maine saying the budget was “a reflection of misplaced priorities” and Rep. Michael N. Castle of Delaware saying the proposal “may fall short in balancing non-war Defense Department funding with the need for critical domestic-spending priorities.”

But conservative groups said Mr. Bush should have done more to rein in spending.

Republican budget leaders promised to fight any Democrat-led effort to raise taxes.

“We do not have a revenue problem in Washington, we have a spending problem,” said Rep. Paul D. Ryan of Wisconsin, the top Republican on the Budget Committee. “When revenues are coming in as fast as they are, there is no need to raise taxes.”

Sen. Tom Coburn, Oklahoma Republican, sent his fellow senators a letter telling them he will block any new spending that is redundant or not offset by cuts in other programs.

“We are at a point in our history when the question of whether we should live within our means and prioritize spending is beyond debate,” Mr. Coburn said. “Our nation’s unsustainable fiscal course, the impending bankruptcy of Medicare and Social Security, and our national security challenges leave us no option but to make the hard choices today that will secure the future for tomorrow.”

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