Assumptions in Bush's data may be flawed, some say

WASHINGTON -- President Bush's budget relies on what fiscal analysts call a variety of debatable assumptions, and it does not include long-term plans to overhaul Social Security, Medicare, or the tax system, which the analysts say must happen for the government to put itself on a course toward erasing skyrocketing deficits.

The US deficit, which Bush has promised to cut in half by 2009, is projected to reach a record of $423 billion this year, and drop gradually thereafter.

But it could soar again if Bush's tax cuts are extended, and if entitlement programs are not overhauled.

Analysts questioned a number of assumptions in Bush's budget, such as his assertion that the government will take in $4 billion over five years from oil drilling in the environmentally sensitive Arctic National Wildlife Refuge in Alaska. Congress has rejected the president's proposal for such drilling.

Bush's budget for fiscal 2007 also revives his failed plan to provide private Social Security investment accounts. The budget does not include details on how he would pay for those accounts.

And while the White House's budget director, Joshua B. Bolten, said the president wants to repeal the Alternative Minimum Tax, which is hitting many more middle-income families, the budget addresses only a temporary one-year adjustment in the tax.

The larger problem, Bolten acknowledged yesterday, is that while the spending plan addresses some short-term problems mostly by cutting discretionary spending programs, it does not tackle long-term, unfunded obligations in entitlement programs.

Discretionary programs are those that can be added or eliminated at the discretion of Congress. Entitlement programs are those that the government must provide, such as Social Security, which has increasing costs from baby-boomer retirements.

''Deficits stemming largely from unsustainable growth and entitlement programs, such as Social Security and Medicare, will begin to rise indefinitely," Bolten said yesterday.

''No plausible amount of spending cuts in discretionary accounts or tax increases could possibly solve this problem," Bolten added.

Bolten then echoed Bush's call for Democrats to work with Republicans to overhaul entitlement programs -- a prospect that analysts said is unlikely because of midterm congressional elections.

''This is a budget of delayed reform," said Eugene Steuerle, a senior fellow at the Brookings Institute and a former top tax official in the Reagan administration. ''We have these broken programs and the proposals to fix them aren't here. They are not in the budget, and they are not on the congressional agenda."

While liberal groups and Democrats criticized the budget, as expected, the basis for the forecast came under fire from conservatives as well. Brian Riedl, the senior budget analyst at the conservative Heritage Foundation, said that Bush's plan does not address the need for underlying reform in the entitlement programs.

Bush has spent much political energy talking about the need to extend his tax cuts, which, Riedl said, average about $2,000 per household and will expire in 2010.

But Riedl said Bush must talk much more about the price of any failure to overhaul the entitlement programs, which he said would cost households an extra $6,400 by 2016.

''The president needs to talk much more about the growth of entitlements, Social Security, Medicare and Medicaid," Riedl said.

Asked at a briefing why Bush had not used the budget plan to call for specific reforms of entitlements, Bolten remarked on the difficulty that Bush had last year when he tried to persuade Congress and taxpayers to overhaul Social Security, and said that the problems over enacting entitlement reforms are likely to continue this year.

Some Democrats, meanwhile, blasted Bush for slashing some entitlement programs and using questionable economic assumptions to calculate revenue.

''This budget is utterly detached from any financial reality," said Senator Kent Conrad of North Dakota, the ranking Democrat on the Senate Budget Committee. ''When you put back the things the president is not telling you about, there is just red ink as far as the eye can see."

When he took office in 2001, Bush inherited a $127 billion budget surplus, which has become a deficit because of the combined impact of tax cuts, increased spending on entitlements, anti-terrorism programs, the wars in Iraq and Afghanistan, and Hurricane Katrina. The government is projected to have a $423 billion deficit for 2006.

While the 2006 deficit would be a record in actual dollars, it is not a record in terms of percentage of gross domestic product. The 2006 deficit is 3.2 percent of the GDP, compared with about 6 percent in 1983.

The budget submitted yesterday projects the deficit will drop to $354 billion in 2007, and to $208 billion by 2009.