Bush's budget heavily in red

Big increase for defense, major tax cuts combine to produce rising deficit

$2.23 billion spending proposal

February 04, 2003|By Paul West | Paul West,SUN NATIONAL STAFF

WASHINGTON - President Bush sent Congress a $2.23 trillion spending plan punctuated with red ink yesterday. Putting dollar signs on one of the most ambitious presidential agendas in years, he called for the largest increase in military spending in a generation and $1.3 trillion in new tax cuts.

His 2004 budget reflects the increased cost of fighting terrorism at home and abroad. It fails, however, to include the expense of a war with Iraq, which has been estimated at $50 billion to $200 billion or more.

"This is a president of big projects and big ideas," said budget director Mitchell E. Daniels Jr., one of Bush's top aides.

FOR THE RECORD - A headline in yesterday's editions gave an incorrect amount for President Bush's proposed budget for 2004. The correct amount is $2.23 trillion.

The president, in his written budget message, said his plan "restrains the growth in federal spending." He would clamp down hard on programs not directly related to military or civil defense, allowing non-defense programs to grow only slightly and, in some cases, not at all.

Speaking in Bethesda at the National Institutes of Health, Bush said overall federal spending would increase by "about as much as family income is expected to grow," 4.2 percent.

Among the big-ticket items is $380 billion for the Defense Department, the largest increase since the Reagan administration's buildup about two decades ago.

Bush is also requesting $35 billion for homeland defense. The increase over this year is about $3 billion, or 8 percent, less than many in both parties say is needed.

Separately, Bush intends to ask soon for billions more from Congress to pay for the increased cost of fighting in Afghanistan and other countries.

Daniels indicated that supplemental budget request is unlikely to include new spending for the space shuttle program as a result of the Columbia disaster.

He noted, however, that the budget, which was completed before Saturday's tragedy, already includes $600 million in additional spending for the shuttle program next year.

Opponents of Bush's policies accuse the president of trying to have it all - more money for defense and for many of his cherished conservative initiatives.

Those include his previously announced tax-cut plan, which would make corporate dividends tax-free for investors, at a cost of $385 billion to the Treasury. He also wants $9.1 billion for missile defense and money for a number of his pet domestic projects, such as $500 million for school choice.

The result of what critics say is Bush's budgetary profligacy: unbalanced budgets at least until 2008, which would be the final year of a second Bush term should he win re-election.

Unlike more conventional Republican administrations - including that of his father, who raised taxes to help narrow the deficit - the current White House is led by a president and senior aides who maintain that their supply-side policies will erase the red ink from the budget within a few years.

Bush's budget director tried to play down the significance of the deficit numbers, including next year's $307 billion - the largest such figure ever.

Administration officials pointed out that worst deficits of the 1980s were more than twice as large, relative to the size of the U.S. economy.

At a briefing for reporters, Daniels characterized the deficit as "moderate." He said a budget gap of that size would not cause serious damage to the economy, though he could not predict when the government might get back in the black.

The administration projected a $304 billion deficit for this year and a gradual dip in the deficit after the 2004 fiscal year, which begins in October. But it forecast that the deficit will begin to worsen again in 2008, the final year for which estimates were presented.

Abandoning a practice that began in the mid-1990s, the White House calculated the overall impact of its tax and spending proposals only five years into the future. The previous 10-year budget estimates proved to be "wildly misleading," Daniels said.

But skeptics have noted that had the 10-year estimates continued, they would have shown a ballooning impact of Bush's tax cut - and deficits extending well into the next decade.

In the two years since Bush took office, a projected federal surplus of $5.6 trillion over 10 years has disappeared. Instead, the projected deficit for the first eight years of that decade is more than $1.5 trillion, according to Bush's budget.

Daniels blamed the worsening deficit picture on the increased cost of fighting terrorism since Sept. 11, 2001, and the stubbornly slow recovery from the 2001 recession.

He acknowledged that Bush's tax cuts would account for $114 billion, or nearly 40 percent, of next year's projected deficit. The cost to taxpayers of paying interest on the federal debt, which Daniels called "our national mortgage payment," would be 8 cents of every tax dollar in 2004 and would continue to grow for at least five years.

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