January 10th 2006 - President George W. Bush is preparing a budget request for next year that officials say would carve savings from programs such as Medicare, NASA and agriculture, testing lawmakers' pledges to hold down spending in an election year.
Administration and congressional officials say Bush will propose more cuts in so-called entitlement programs as well as discretionary spending in fiscal year 2007, which begins Oct. 1, to hold down budget growth as the deficit swells with the cost of hurricane relief, the war in Iraq and subsidizing prescription drugs for senior citizens.
``Clearly, the rate of growth is going to be below the rate of inflation'' except for defense and homeland security, Senate Budget Committee Chairman Judd Gregg, a New Hampshire Republican, said in an interview.
The president may face resistance from Congress on cuts to entitlements, which cover broad categories of federal spending including crop subsidies, food stamps and health care for the elderly. Every seat in the House and one-third of those in the Senate is up for election in November and many of the programs have vocal constituencies, such as farmers and senior citizens.
``Policy is going to butt heads with politics this year,'' said Bill Hoagland, a budget analyst for Senate Majority Leader Bill Frist, Republican of Tennessee. Cuts in Medicare or other entitlement programs ``aren't politically saleable.''
`Sacrifices'
The budget ``is going to call for sacrifices, no doubt about it,'' Treasury Secretary John Snow said today in Washington. ``The growth rate of things will be slowed. There will be some outright reductions.''
Snow declined to be more specific, and Scott Milburn, a spokesman for the Office of Management and Budget, wouldn't comment on possible spending cuts.
Bush submits his fiscal 2007 budget to Congress on Feb. 6. It likely will total about $2.7 trillion, based on Congressional Budget Office projections. The president previewed some of his plans in recent addresses.
Entitlement programs -- those which pay benefits to whoever qualifies under the law -- are growing faster than the country's ability to pay for them, Bush said in Chicago Jan. 6. The next day, in his weekly radio address, the president said, ``We do not need to cut entitlements, but we do need to slow their growth.''
Proportional Savings
Gregg said he supports to push for holding down entitlement spending, which amounted to about $1.3 trillion in fiscal 2005. Medicare, Medicaid and Social Security account for about 60 percent of the federal budget, he said, so they should account for 60 percent of budget savings.
``Future restraint should be in proportion to spending,'' he said.
Bush's budget proposal may seek trims in Medicare by cutting doctor reimbursement rates, a Senate Republican aide said, speaking on condition of anonymity. Winning approval in Congress may be difficult. Senate Republicans needed Vice President Dick Cheney in December to cast a tie-breaking vote to approve $39.7 billion in cuts to benefit programs.
Opposition
The reductions were opposed by Democrats and some Republicans such as Senator Olympia Snowe of Maine.
``She wouldn't want the beneficiaries to bear the brunt of cuts,'' in any new proposal affecting Medicare or Medicaid, said Preston Hartman, Snowe's spokesman. Snowe would also object to any cuts to food stamps, he said.
Gregg said White House budget director Joshua Bolten also will propose reducing or eliminating more low-priority or poorly performing programs. Last year Congress agreed to reduce or end 89 of 154 programs proposed for cutting by Bolten for a savings of $6.5 billion, according to the White House.
``Yes, there's no question'' that such programs will be targeted again, said Gregg, who has made deficit reduction one of his priorities. Gregg, who said he has conferred with Bolten in recent weeks, declined to give details.
Farmers and environmentalists should expect a further tightening of the Agriculture Department's budget. There's an effort to slash spending in everything from crop subsidies to crop insurance to conservation programs, said an administration official involved in the budget process who spoke on condition of anonymity.
NASA Supporters
The budget office also aims to reduce spending on the Space Shuttle program, slicing as much as $6 billion from the projected cost of almost $70 billion in the next four years.
Illustrating the resistance to budget cuts, members of Congress from Texas and Florida, where two of NASA's largest facilities are located, are seeking to head off trims. Republicans including former Majority Leader Tom DeLay and Senator Kay Bailey Hutchinson have written to Bush or spoken with Bolten in the past few weeks. DeLay also has lobbied Vice President Dick Cheney, according to DeLay spokesman Ben Porritt.
A reduction of as much $6 billion ``would mean the immediate retirement of the Shuttle Atlantis and a cut of the needed 19 Shuttle missions to between eight and 11 through fiscal 2010,'' a letter signed by 36 lawmakers said.
The cuts will be proposed as a new raft of spending swells the deficit. Congress has already approved about $62 billion in aid and reconstruction funds, mostly for Hurricanes Katrina and Rita. The new prescription drug benefit under Medicare is estimated to cost $724 billion over 10 years, with as much as $40 billion this year, depending on signup levels.
Iraq Costs
The White House also will request an extra $50 billion to $80 billion for the war in Iraq, and there will be pressure to provide subsidies for heating costs for low-income households, according to the Senate aide.
In addition, congressional efforts to overhaul the alternative minimum tax to prevent more than 15 million taxpayers from paying higher taxes because of inflation would mean the loss of more than $30 billion in revenue.
As a result, the average estimate of five Wall Street economists is for a fiscal 2006 deficit to swell to about $365 billion, falling to $357 billion in fiscal 2007.
The president, in Chicago last week, maintained his pledge to cut the deficit in half to $260.5 billion by 2009. Some budget experts say that's a stretch.
``They're not going to get there by nibbling around the edges,'' said Brian Riedl, budget analyst at the Heritage Foundation, a conservative think tank in Washington that typically supports Republican presidents. ``It's going to take serious reform to reach that goal.''
Deficits
The deficit shrank to $319 billion in 2005, 2.6 percent of the gross domestic product, from a record $413 billion the year before. It was the first decline since Bush took office.
Hoagland, the budget analyst for Frist, predicts this year's deficit will climb to about $370 billion, or around 2.8 percent of the gross domestic product, and decline in fiscal 2007 to about $350 billion, or 2.6 percent of GDP.
Gregg said the deficit goal will be in reach as spending on Iraq and disaster relief lessens in future years.
``Once you curtail spending on Katrina and Iraq, you've really put some glide-path mechanism in'' for reduced spending, Gregg said.