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THE FEDERAL BUDGET

Bush Plan Calls for Tax, Spending Cuts

Politics: His proposal reduces funding for most agencies, except education and defense. Democrats say it plays down realities.

March 01, 2001|JONATHAN PETERSON | TIMES STAFF WRITER

WASHINGTON — President Bush sent Congress a federal budget framework on Wednesday that would curtail and even reverse the growth of many domestic programs while plowing savings into tax relief and debt reduction.

Over a 10-year period, Bush pledged to slash the national debt by $2 trillion, set aside funds to protect Medicare, cut taxes by $1.6 trillion and establish a new reserve fund for unexpected needs.

At the same time, he would leave $1 trillion in outstanding debt, a decision that is likely to spark controversy.

Bush's 2002 budget, with outlays just short of $2 trillion, would decrease spending on a broad range of agencies, including the Labor and Commerce departments. It would allow for growth in defense, education and medical research.

Bush argued that his approach was "compassionate," "responsible" and "reasonable." The plan, he said, presumes "a federal government that is both active to promote opportunity and limited to preserve freedom."

But it was quickly assailed on Capitol Hill and even by some nonpartisan budget analysts, who said it lacked important details and played down budget realities that could lead to more spending than the White House predicts--leading to harsh trade-offs between tax relief and domestic spending.

"This has focused attention on what the president wants to do, not what he has to do," said Stanley E. Collender, managing director of the federal budget practice at Fleishman Hillard, a public relations firm. "He's not saying you have to eat your broccoli to get your dessert. He's just saying you get the dessert first."

Some also took issue with White House forecasts of a $5.6-trillion surplus arising from continued economic growth and an ongoing stream of healthy revenue--an upbeat view of the future that they said was meant to pave the way for a big tax cut.

"The president is gambling our healthy economy, the future of Medicare and Social Security and our children's education on budget predictions that are no more reliable than a weather forecast," argued Rep. Richard A. Gephardt of Missouri, the House Democratic leader. " . . . His numbers simply do not add up. We weren't handed a budget today, we were handed a tax cut."

But House Budget Committee Chairman Jim Nussle (R-Iowa) complimented the spending plan as "a responsible budget that funds the priorities of the American people, plans for the future and keeps the economy growing."

Overall, Bush would allow 4% growth in spending, about $26 billion in all, for the government's "discretionary" accounts--those that require annual appropriations from Congress. Most of it would go to defense ($14.2 billion), education ($4.6 billion) and health care ($2.8 billion).

Many other domestic activities would be curtailed. The departments of Agriculture, Commerce, Energy, Interior, Justice, Labor and Transportation, the Environmental Protection Agency, Federal Emergency Management Agency and Army Corps of Engineers would all be in line for cuts.

The Transportation Department budget would drop from $20.5 billion this year to $18.4 billion in 2002 and the Agriculture Department budget would slip from $21 billion to $19.4 billion.

The actual programs to be cut were largely unspecified. The new administration plans to send its detailed budget to Congress in April. But some of the details were already apparent.

The Justice Department would lose about $1 billion out of its $20.9-billion budget, much of it in special grants approved by the prior administration but not affecting its core activities. The Commerce Department's $5.1-billion budget would be reduced by $400 million, with high-tech research programs favored by the Clinton administration seen as candidates for cutbacks.

Bush also proposed $2.8 billion in savings by trimming federal subsidies for flood insurance and $1.2 billion by increasing bank examination fees. Funding would be reduced for the U.S. Export-Import Bank and the Overseas Private Investment Corp., which provides political risk insurance and loans for U.S. firms in emerging markets.

White House aides stoutly defended the budget as careful and responsible.

But critics rejected that proposition, arguing that the White House had conveniently left out likely expenses related to defense, agriculture, Medicare and other areas, which would make it harder for Bush to win support for his proposed $1.6-trillion-plus tax cut.

Bush, for example, proposed creating a new Medicare benefit for prescription drug purchases.

He has said he favors providing drug coverage through a version of legislation offered by Sens. Bill Frist (R-Tenn.) and John B. Breaux (D-La.), which would make it more likely that the elderly would have to join managed health care plans in order to get coverage.

He would pay for it with some of the $153 billion he has suggested for "modernizing" Medicare.

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