Deep cuts sought for social programs

WASHINGTON -- President Bush yesterday unveiled a $2.77 trillion spending plan for the next fiscal year that would slash healthcare and education spending, and that would enact deep cuts to scores of other federal programs, while boosting the military budget and making permanent a series of tax cuts that Congress has passed in recent years.

The budget would shave $35.9 billion over five years from Medicare, the politically sensitive healthcare program for the elderly. The Medicare cuts, along with a $4.5 billion reduction in the Medicaid budget, are part of $65.2 billion in savings culled from entitlement programs, the fastest-growing part of the federal budget.

By law, the government is required to spend money on those programs, like Medicare, to cover those who are eligible.

Bush also has proposed saving $14.7 billion by eliminating or significantly scaling back 141 government programs, including antidrug efforts in schools, food stamps, vocational education, and housing benefits for the elderly and the disabled.

''These efforts to restrain the growth in mandatory spending are vital, not just for our near-term deficit-reduction efforts but especially for the long term," said Joshua B. Bolten, who is the director of the Office of Management and Budget.

Bolten said the plan would help the president stay on track to fulfill his campaign promise to halve the federal budget deficit by 2009, even though it is expected to reach a record $423 billion this year. That would amount to $105 billion more than last year.

Democrats disputed that assertion, accusing the president of hiding the true costs of tax cuts and the war in Iraq. They also charge that the spending plan slashes the programs that help vulnerable Americans so Bush can pay for tax cuts that primarily benefit the rich.

''The president is asking our seniors, our students, and our families to clean up his fiscal mess with painful cuts in healthcare and student aid," said the Senate minority leader, Harry Reid, Democrat of Nevada.

The president's annual budget proposal is the most detailed policy blueprint he files with Congress. The House and Senate will now begin crafting budgets of their own, a process that typically takes much of the year. The fiscal year 2007 begins Oct. 1.

This year's budget proposal was released at a politically difficult time for Bush.

The president's approval ratings have plummeted as members of Congress are paying more attention to election-year politics.

Despite GOP majorities in the House and the Senate, the president has had trouble moving his agenda in recent months, though some lawmakers warmly greeted the budget proposal yesterday.

''President Bush has laid the groundwork for a renewed look at our spending priorities as we focus on reining in federal spending, reducing the deficit, and continuing America's strong economic growth," House Speaker J. Dennis Hastert, an Illinois Republican, said in a statement.

Bush is under pressure from his party's conservative wing to control federal spending, a fact reflected in his proposal for paltry growth -- 0.5 percent -- in discretionary spending not related to national security. Overall spending would rise 2.3 percent under Bush's budget plan.

The Department of Education's spending on basic programs would fall by $2.1 billion, or 3.8 percent, and the president would save about $3.5 billion by cutting a range of programs designed to promote the arts, technology, and after-school programs. Meanwhile, federally based programs to help pay for higher education would take significant hits: The Perkins Loan program would be eliminated, and Pell grant funding for college students would drop by $4.6 billion.

Bush would use some of those savings to extend the testing provisions of No Child Left Behind to high schools, at a cost of $1.5 billion.

He would also spend $5.9 billion for his new ''American Competitiveness Initiative," designed to recruit math and science teachers and to increase investments in research and development.

Senator Edward M. Kennedy of Massachusetts, who is the leading emocrat on the Senate committee that oversees education, said the cuts that Bush wants would undermine his goal of making American workers more competitive in a global economy.

''Instead of meeting these goals with new investments in education, the budget released by President Bush today shortchanges our competitiveness, shortchanges our opportunity, and shortchanges our future," Kennedy said.

The savings in Medicare and Medicaid would come primarily by requiring higher-income seniors to pay more for services, and by reducing payments to hospitals and nursing homes that are scheduled for automatic increases under current law.

Those cuts could deeply affect smaller hospitals, many of which depend on federal programs for as much as half of their revenue, said Representative Richard E. Neal, a Springfield Democrat who serves on the House Budget Committee.

''It absolutely will affect service delivery," Neal said. ''Everything in this budget is shoehorned around the president's tax cuts."

But Bolten, the budget director, said the healthcare proposals are not cuts from current spending. He said they would slow the rate of Medicare growth only marginally, from about 7.8 percent per year to 7.5 percent.

''These are modest reductions in the rate of growth," Bolten said.

Amtrak, the national rail carrier, would see its subsidy slashed to $900 million from the $1.3 billion being spent on the system this year, making it likely hundreds of jobs would be cut, too.

The Department of Defense would get the biggest funding increase; Bush has asked for a record $439.3 billion budget -- 7 percent more than this year, and 48 percent above the level of spending in 2001. In addition, Bush is seeking $50 billion to pay for the wars in Iraq and Afghanistan in 2007, along with nearly $2 billion more in assistance programs for the two nations.

On taxes, the president wants Congress to make permanent a series of reductions to taxes on income, capital gains, dividends, and estates of the deceased that were passed in 2001 and 2003. Those cuts are scheduled to expire between now and 2010.

The president would also set aside $51.7 billion over five years for expanded health savings accounts, which permit taxpayers to set aside money tax-free for health care expenses.