Bush budget puts pinch on domestic spending

WASHINGTON -- President Bush yesterday proposed deep cuts to federal healthcare, education, and transportation programs, searching for new money in the federal budget to pay for increasingly costly defense programs and the war in Iraq.

The president's $2.9 trillion spending plan calls for saving $100 billion in Medicare and Medicaid payments, and for limiting eligibility in the State Children's Health Insurance Program -- a change that could result in the loss of health care for children in Massachusetts and other states.

Bush said the cuts will help balance the federal budget by 2012, even as the nation spends $141.7 billion next year on fighting in Iraq and Afghanistan.

"Our priority is to protect the American people," Bush said after a Cabinet meeting where he introduced his fiscal 2008 budget. "I strongly believe Congress needs to listen to a budget which has no tax increase, and a budget, because of fiscal discipline, that can be balanced in five years."

But Bush faces a skeptical audience on Capitol Hill. Democratic leaders pledged to halt planned cuts in health and education, and lawmakers in both parties said they will scrutinize the spending plan for the Iraq war.

"This budget was probably dead before typesetting, not even dead on arrival," said Stan Collender , a budget specialist and the managing director at Qorvis Communications, a Washington-based public relations firm. "A lame duck [Republican president] with a Democratic majority doesn't have the ability to ask for [something] and just have it happen."

Republican leaders on Capitol Hill lauded Bush's refusal to raise taxes and his denunciation of pork-barrel projects that Republicans and Democrats have included in federal spending bills. But Democrats derided the budget, calli ng it a fiscally irresponsible plan that would add to the national debt while cutting programs favored by Democrats .

"Despite the historic fiscal failures of the past six years, President Bush's budget proposes more of the same," said Senate majority leader Harry Reid , Democrat of Nevada, referring to cuts in domestic social programs and increased spending on the wars in Iraq and Afghanistan.

The proposed cuts to Medicare and Medicaid are larger than similar cuts Bush asked for in his previous budget proposals. Democrats -- whose minority status in previous years had hamstrung them from blocking such cuts -- vowed to stop them from going into effect for the next fiscal year.

If Bush's plan to trim payments to healthcare providers were to take effect, Massachusetts hospitals would lose as much as $190 million next year, according to the Massachusetts Hospital Association. In addition, the state could see its annual Children's Health Insurance Program subsidy cut by $10 million, to $240 million -- a reduction that probably would force the program to trim the number of children it serves.

Those cuts could destroy the delicate financing that allowed Massachusetts to pass its first-in-the-nation law guaranteeing near-universal health coverage, said Robert E. Gibbons , interim president and CEO of the Massachusetts Hospital Association.

"This could undermine health care reform if this goes through," Gibbons said.

Specific cuts in Medicare and Medicaid generally mean fewer services will be available; federal payments made to Massachusetts nursing homes, for example, would total about $36 million in next year's budget, and $273 million over the next five years, according to an analysis by the office of Senator Edward M. Kennedy , a Massachusetts Democrat. The proposed cuts would cost each of the state's 400 Medicare-certified nursing homes about $682,500, Kennedy's office estimated.

On education, while Bush calls for reauthorization and expansion of the No Child Left Behind Law, his budget falls $14.8 billion short of fully funding the program next year -- forcing states to make up the difference in order to meet the federal education mandate. Though the president has asked to raise the maximum Pell Grants from $4,050 to $5,400 to help low-income students afford college, he would pay for the increase by phasing out low-interest federal Perkins college loans.

"This budget would continue us down the wrong path, but fortunately the new Congress is determined to change course -- and will," said Kennedy, chairman of the Senate Health, Education, Labor, and Pensions Committee.

The president's budget calls for slicing $253 million from federal railroad subsidies, a 20 percent cut that means $100 million less for Amtrak. According to the proposal, Amtrak would have enough money to continue fixing the infrastructure of its popular but unreliable Boston-to-Washington route, though other routes connecting Boston to the Midwest and beyond could be affected. Congress has rejected similar cuts in previous years.

Bob Greenstein , director of the Center on Budget and Policy Priorities , said some of the Medicare cuts might help bring federal spending under control. But he said budget cuts to popular programs like one that helps low-income homeowners heat and air-condition their homes, and Head Start, a prekindergarten program for underprivileged children, unfairly penalize poorer Americans.

"The budget would make inequality worse, and aggressively so," Greenstein said.

While the outlines of the president's war request have been known for weeks, the fact that the administration is asking for money in fiscal 2008 and 2009 suggests the administration anticipates that US troops will remain in Iraq at least through 2009.

Democrats have vowed to scrub those requests in the coming weeks.

"Democrats will not give the president a blank check on Iraq," declared House Speaker Nancy Pelosi , Democrat of California, after the budget was announced.

The 2008 budget includes items from the president's previous wish lists, including changes meant to solidif y long-term cuts in domestic spending. He also asks for a line-item veto allowing him to strike funding for specific projects and programs.

But the president's seventh budget proposal -- his first to a Congress where Democrats outnumber Republicans -- doesn't include the ambitious, sweeping proposals he has sought before. The only major tax cuts he included would make permanent only the ones Congress approved during his first term, including lower taxes on income and dividends. Those extensions would cost $1.9 trillion over 10 years, but Democrats are skeptical about whether the nation can afford it.

Rob Portman , director of the Bush administration's Office of Management and Budget, acknowledged that the White House had modified some of its proposals to avoid fights with Congress.

For example, the budget to fund the war, while still included in a separate, supplemental package, is more detailed than in previous years, something Democrats have wanted for a while.

"We heard loud and clear from Congress" that lawmakers wanted "more transparency and more and better information earlier so they could conduct better oversight," Portman said.