Bush unveils $1.96 trillion budget plan

Just three days after the Senate passed a fiscal 2002 budget resolution that slashed President Bush's proposed tax cut and almost doubled his proposed rate of spending growth, Bush Monday released a detailed, $1.96 trillion 2002 budget plan that nevertheless replicates the tax, spending and debt reduction policies first proposed in his February budget blueprint.

Senate action cut Bush's proposed $1.6 trillion tax cut over 10 years to $1.2 trillion and increased the rate of spending growth from Bush's 4 percent to more than 7 percent.

Bush's budget would make the largest cuts in the Agriculture, Transportation and Justice departments, and the Army Corps of Engineers, with the most sizable increases slated for the departments of Health and Human Services and Education.

"This budget funds our needs without the fat," Bush said before meeting at the White House with his Cabinet.

As in February, Monday's detailed budget proposes the FY02 spending level be set at $660.6 billion in budget authority, up from $649.4 billion in FY01. Bush proposes that $5.6 billion of the FY02 total be set aside in an "emergency reserve."

Bush also renewed his proposal to set aside $841 billion of the estimated 10-year, $5.6 trillion total budget surplus in a separate contingency fund, while allocating $420 billion from the surplus to meet the debt service costs of his tax cut, $153 billion to his Immediate Helping Hand proposal for a limited Medicare prescription drug benefit, and $19 billion for additional, unspecified spending.

Democrats have assailed Bush for subsuming the Medicare Part A trust fund surplus, which CBO estimates at $393 billion over 10 years, into his general contingency fund.

Treasury Secretary Paul O'Neill defended the budget in a session with reporters, highlighting "increases that are provided for a plethora of programs and activities," notably education and medical research. Office of Management and Budget Director Mitch Daniels noted that $8 billion in budget cuts involved earmarks that were either one-time expenditures or never requested by former President Clinton.

Daniels simultaneously criticized and minimized the Senate's FY02 budget resolution. He said the new spending amounted to an increase of at least 8 percent and would eat up an additional $3 billion of the surplus. But he called support for the non-binding resolution "pretty much free votes," saying, "Boys will be boys."

Bush's budget relies on the same economic assumptions for both FY02 and the next decade as the budget blueprint he unveiled in February. It assumes real GDP growth of 3.3 percent in FY02 and 3.2 percent from FY02 through 2011, and assumes 4.6 percent unemployment both next year and over the next decade.