WASHINGTON - President Bush proposed a $3.1 trillion budget yesterday that includes big increases in military spending, major cuts in payments to healthcare providers, and extensions of tax cuts that benefit the wealthiest Americans. Bush, who inherited a budget surplus, said he expects a near-record deficit of $407 billion when he leaves office next year.
Bush sought to increase Pentagon spending by 7.5 percent, to $515 billion - plus $70 billion more for the wars in Iraq and Afghanistan for the coming year. At the same time, Bush proposed cuts in 151 government programs, such as grants for elders' food services and community services for the poor, and reduced spending in several others - including significant reductions in Medicare and Medicaid. Spending in many other programs was frozen.
"The budget protects America and encourages economic growth," the president said, urging Congress to pass the budget quickly. He added that the plan reflects that "our top priority is to defend our country, so we fund our military, as well as fund the homeland security."
But Senator Kent Conrad, the South Dakota Democrat who chairs the Senate Budget Committee, said Bush is proposing "more deficit-financed war spending, more deficit-financed tax cuts tilted to benefit the wealthiest." The president's proposal, Conrad said, is "a further explosion of debt and the undermining of our nation's economic security."
Even some Republicans were skeptical of the budget, including the House Republican Study Committee, made up of 100 conservative members of Congress. The committee said in a statement that the budget "includes too much spending" and expressed concern about the increasing deficit, but said Republicans should fight any Democratic effort to raise taxes.
A number of New England legislators complained that the new budget hurts two programs crucial to the region: the Low Income Home Energy Assistance Program, which faces a 22 percent reduction, and the National Institutes of Health medical research program, which won't see any funding increase.
Representative Michael Capuano, Democrat of Massachusetts, decried Bush's proposal to cut LIHEAP by $280 million even though it helps the poor pay for heating and home insulation. "LIHEAP numbers now are only servicing something like 15 percent of the people who are eligible, and they want to cut that further?" he said.
The NIH funds many medical projects at organizations and universities across the country, including many in Massachusetts. Because of inflation, "level funding" of its budget hurts research groups that rely on federal money, said Alan Dittrich, president of the Massachusetts Society for Medical Research. The organization's members include Partners HealthCare, Harvard University, and Boston University, as well as many other NIH-funded groups.
"Each time you don't fund something or reduce it to make it impossible to complete the research, that's an opportunity lost, at least for a while," Dittrich said.
The BU Medical Campus gets more than $100 million in NIH grants each year. For the past four years, the school's administration has coped with flat funding or small increases that don't keep pace with inflation.
The budget includes the $150 billion economic stimulus package of personal tax rebates and corporate tax cuts that is now before Congress and is expected to be approved soon. The budget also proposes extending temporary tax cuts Bush enacted in 2001 and 2003, which are set to expire in 2010. Bush wants them extended to 2013, which he estimated would cost $635 billion.
Many Democrats have proposed maintaining the tax cuts for the middle class but letting them expire for people earning more than $200,000.
Under Bush's plan, defense spending would reach $515.4 billion, an increase of roughly 7.5 percent over the previous year, excluding war costs. A big chunk of new defense spending includes $20 billion to expand the Army and the Marine Corps - by 65,000 and 27,000 troops, respectively - by the end of 2010. The increase will pay for more recruiters, advertising campaigns, and larger cash bonuses for recruits and veterans who reenlist.
"The defense budget has grown dramatically in the last eight years," said Steve Kosiak, a defense budget analyst at the Center for Strategic and Budgetary Assessments in Washington. "If the administration gets everything it wants, we'll be spending 37 percent more in real terms than in 2000. And that is only the base defense budget. If you add the war-related funding, we will be at or near record levels."
The administration yesterday separately requested a down payment of $70 billion for war costs in fiscal year 2009. Pentagon officials said they plan to ask for more later in the year after the president reviews the current force levels in Iraq.
The president's spending plan assumes that the economy will grow at 2.7 percent this year, but a recession could reduce tax revenue and add to the deficit.
The White House said it expects to save $178 billion over the next five years through cuts in the Medicare health program for the elderly. White House budget director Jim Nussle said the reductions could be made by denying the "inflationary increases for providers," reducing expected payments to doctors and hospitals rather than decreasing benefits to individuals. Such a proposal is bound to attract intense opposition.
When Bush took office in 2001, he inherited a surplus of $127 billion from the Clinton administration. That became a record deficit of $413 billion by 2004, which dropped $162 billion last year.
