Bush unveils $2.5 trillion budget

Proposal seeks to reduce deficit through cuts in programs, including farm aid and housing grants.


February 7, 2005: 10:11 AM EST

WASHINGTON (Reuters) - President Bush proposed a $2.5 trillion budget Monday that cuts domestic programs from farm aid to housing grants for the poor, as he sought to curb budget deficits that have soared on his watch.

The plan would cut discretionary domestic spending outside national security by 0.7 percent in what the White House called the most austere budget proposal since the Reagan era.

Bush, who inherited a budget surplus that shifted to record deficits in his first term, wants to show Wall Street and fiscal conservatives he is serious about tackling deficits.


Many are skeptical that even a Republican-controlled Congress will sign off on the cuts and budget hawks question the president's resolve to push them through, given he has yet to veto a spending bill.

Democrats say Bush is forcing the poor to absorb the brunt of the budget pain after giving billions of dollars of tax cuts to the rich in his first presidential term. Republicans may balk at cuts in popular items like farm aid.

The Pentagon and Homeland Security are among the budget's few winners, but they would see a slight slowdown in growth after post-Sept. 11, 2001, surges.

Bush would chop farm programs by 2.9 percent and squeeze $45 billion in savings from the Medicaid health program for the poor while abolishing subsidies for the Amtrak rail system and cutting community development programs by 4.5 percent.

Bush said in his budget statement his plan "takes a hard look at programs that have not succeeded or shown progress, despite multiple opportunities to do so."

From this year's record $427 billion, the budget deficit will narrow to $390 billion in 2006 and $251 billion in 2008, the White House said.

The budget shows Bush's goal of halving the budget deficit would be met by 2008, a year earlier than he had promised. But he used as his starting point the $521 billion he forecast early last year, a figure critics say was inflated.

Federal debt swells
Even if Bush meets the goal, the total federal debt would swell to $11 trillion in 2010 from $8 trillion this year.

The budget leaves out some big items, such as the future costs of military operations in Iraq and Afghanistan and massive borrowing required by Bush's plan to add private retirement accounts to Social Security.

Within days, Bush will ask for another $80 billion to fund the conflicts in Iraq and Afghanistan this year, on top of the $25 billion provided for 2005. Another big supplemental request for the Iraq war is expected to be sent to Congress next year.

Overall discretionary spending would grow by 2.1 percent, slower than the inflation rate of 2.3 percent.

"You will hear a lot of complaining," conceded House Budget Committee Chairman Jim Nussle, an Iowa Republican, though he said he thought Bush would succeed in holding budget growth to lean levels.

Nine of the 15 Cabinet agencies would see cuts, including an 11.5 percent reduction for the Department of Housing and Urban Development.

Housing advocates warned the cuts will force communities to close youth centers and put vulnerable people like the elderly at risk at a time "when wealthy Americans are enjoying the tax cuts that fueled the deficit."

Slower defense growth
The Pentagon would get $18.2 billion more at $419.3 billion. But the 4.8 percent growth rate is smaller than the 7 percent boost in military spending he asked for in fiscal 2005.

The Defense Department plans to cut previously budgeted arms purchases by $6 billion in fiscal 2006 and nearly $30 billion through 2011.

The White House said the Department of Homeland Security, charged with preventing terrorist attacks, would get nearly 7 percent more this year at $34.2 billion. But when airport and security fees are excluded, the department's budget would rise by just 1.2 percent.

Both figures are well below the 16 percent gains averaged since the Sept. 11, 2001, attacks.

Bush asked for $3 billion for the Millennium Challenge Account, less than the $5 billion he had promised for the program set up to give aid to poor nations in exchange for political reform.

The aid budget also includes: $640 million for Pakistan; $450 million for Jordan; $437 million to fight the burgeoning drug trade in Afghanistan and $550 million to support Colombia.