Bush set to cut domestic spending

WASHINGTON -- Domestic priorities like federal aid to schools and health research are squeezed under President Bush's proposed budget for next year, but funding for the Pentagon, the war in Iraq and anti-terrorism efforts get impressive increases.

Monday's budget tome will have a price tag of more than $2.7 trillion. The departments of Education, Commerce, Interior and Energy will see their budgets, on average, frozen or cut slightly below today's already austere levels.

The outline of the budget has emerged from a series of interviews with people familiar with various aspects of the proposal.

Judging from his recent record, Bush should largely get his way in clamping down on the budgets for domestic agencies that are passed each year by Congress. Last year, despite resistance from Democrats and old-school lawmakers in his own party, Bush got Congress to accept a freeze or a slight cut in almost every domestic agency budget.

"Every year of my presidency, we've reduced the growth of non- security discretionary spending, and last year you passed bills that cut this spending," Bush said last week. "This year my budget will cut it again."

Even though domestic non-entitlement programs take only one- sixth of all federal spending, they are in the administration's bulls eye as it tries to reel in the growing deficit.

The National Institutes of Health's budget is frozen at this year's level and the Centers for Disease Control and Prevention is being asked to take a 2 percent cut. Both programs lose ground as Bush puts a higher priority on the wars in Iraq and Afghanistan and hurricane relief.

The Pentagon would receive a nearly 5 percent increase in its budget, to $439.3 billion, defense officials said, with an additional $120 billion earmarked for operations in Iraq and Afghanistan. Those war funds would be spread over both the current budget year and fiscal 2007, which begins Oct. 1.

The budget also will project spending $18 billion more this year for hurricane relief along the Gulf Coast, bringing total spending in response to September's devastating storms over the $100 billion mark.

In his Saturday radio address, Bush pitched his "American competitiveness initiative," which would double funding for basic research programs in the physical sciences over the next 10 years and improve training and recruitment of math and science teachers.

Bush also warned Congress last week he wants to eliminate or cut more than 140 programs to save $14 billion in 2007 alone. Last year, he succeeded in saving $6.5 billion with a similar request, winning from Congress about two-fifths of the spending cuts he sought.

Some of the new proposed cuts, such as eliminating the $107 million Commodity Supplemental Food Program, are likely to get a chilly reaction on Capitol Hill. The program provides food to low- income mothers and children under 6 years old, as well as to the elderly poor.

There's nearly universal agreement that policymakers eventually will have to tackle tackling runaway Medicare costs and Bush takes a politically perilous first step in that direction in his budget.

"We have to address these issues," said Senate Budget Committee Chairman Judd Gregg, R-N.H., who, like Bush is a member of the Baby Boom generation, whose claims on Social Security and Medicare threaten to swamp the budget in coming decades.

"It's not fair for our generation, when we have control over policy, not to look for a way to pass a more fiscally healthy nation on to our children," Gregg said.

While modest, Bush's endorsement of wringing tens of billions of dollars in savings from health care providers such as hospitals and nursing homes, may prove to be a difficult sell to his GOP allies on Capitol Hill. Hospitals are a powerful lobbying group and are typically some of the leading employers in lawmakers' districts and states.

"Think of lobbyists as a giant immunological system. And this (Medicare proposal) is a virus," said Alexander Vachon, a health care analyst. "It is going to set off all these white blood cells to go eating on Congress."

Still, by assuming the Medicare savings in the budget Bush can claim he is meeting his promise to cut the deficit in half -- from an inflated $521 billion estimate for early 2004 -- to $260 billion by the end of his presidency.

The budget meets that target by assuming Congress will agree to Bush's policy priorities and related spending cuts and new fees, even though many are unrealistic, particularly in an election year for lawmakers, or have been rejected repeatedly.

For example, better off veterans are again being asked make higher co-payments for prescription drugs and pay a new $250 annual enrollment fee for their medical care. Congress has rejected both three years in a row. A new proposal to raise fees on military retirees enrolled in the Pentagon's Tricare program isn't likely to fare much better.

A new Department of Homeland Security fee on air travel of $5 each way is likely to get stamped "Dead on Arrival" just as a comparable fee was last year.

The tax-based health initiatives Bush wants -- boosting health savings accounts and making out-of-pocket medical costs deductible - - face resistance because they reduce the revenue side of the budget and exacerbate deficits.

Despite Bush's call to curb the weed-like growth of benefit programs like Medicare and Medicaid, veterans in Congress aren't expecting much progress on the deficit.

"It'll largely be a do-nothing year, unfortunately," said top Senate Budget Committee Democrat Kent Conrad of North Dakota. "We all know the history, which is that very little in terms of bold action gets done in an election year."

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