Bush plan aims to return to budget surplus by 2012
Democrats are skeptical, saying proposal relies on misguided policies including tax cut extensions and cuts in domestic programs.
President Bush's $2.9 trillion fiscal 2008 budget request purports to return the budget to surplus over the next five years through a combination of robust tax revenues, cuts in domestic programs and restrained growth in healthcare entitlements for the poor and elderly -- combined with a substantial defense spending increase.
By fiscal 2012 the $248 billion deficit will be transformed to a $61 billion surplus, despite extensions of Bush's signature tax cuts slated to cost $599 billion over five years and nearly $1.9 trillion over the next decade.
Democrats, controlling both chambers for the first time in the Bush presidency, greeted the budget skeptically. Senate Budget Chairman Kent Conrad, D-N.D., said the plan "clings to the same misguided policies: costly tax cuts that primarily benefit the wealthiest, cuts in domestic priorities, and more fiscal irresponsibility."
House Budget ranking member Paul Ryan, R-Wis., praised the projected debt reduction and said to achieve it, "Congress must keep tax burdens low and further efforts to restrain spending."
The Bush budget assumes more tax revenues to pay for new spending than the Congressional Budget Office estimated in its most recent budget outlook, to the tune of $425 billion over five years. That includes $157 billion more in fiscal 2012 tax revenues -- the first year of the projected Bush surplus -- than CBO estimates. The budget includes a "patch" for the alternative minimum tax for the calendar year 2007, but nothing beyond that.
Total revenue growth is expected to average 7 percent over the next five years -- contrasted with 5.8 percent in CBO's estimates. The measure for the first time contains a detailed accounting of future war costs in Iraq and Afghanistan, including $141.7 billion in fiscal 2008 and another $50 billion in 2009 -- but Democrats criticized that figure as unrealistic.
The budget also contains an accounting maneuver that pushes the cost of Bush's Social Security overhaul proposals to the last year of the budget window -- long after he has left office. In fiscal 2012, the cost of partially privatizing Social Security would be $29.3 billion. Extending the proposal over the next decade would add $637.4 billion to the deficit.
The budget plan proposes $122 billion in savings from mandatory programs over five years, with more than half -- $66 billion -- coming from Medicare. Other proposals include drilling in the Arctic National Wildlife Refuge, cutting student lender subsidies and restricting food stamp eligibility. Offsetting much of the mandatory savings would be new spending on proposals such as the president's Social Security plan and providing a flat deduction for families and individuals who purchase health insurance.
Total discretionary spending would be $929.8 billion in fiscal 2008, a 6.5 percent increase. But after factoring in proposed increases for defense, homeland security, and foreign aid, domestic spending faces steep cuts. The Bush budget also assumes billions of dollars from new user fees, such as increased healthcare enrollment fees and deductibles for military retirees, most of which will be unpopular.
"I doubt that Democrats will support this budget, and frankly, I will be surprised if Republicans rally around it either," said House Budget Chairman John Spratt, D-S.C.