By MARTIN CRUTSINGER, AP Economics Writer 1 hour, 13 minutes ago
President Bush sent a $2.90 trillion spending plan to a Democratic-controlled Congress on Monday, proposing a big increase in military spending, including billions more to fight the war in Iraq, while squeezing the rest of government to meet his goal of eliminating the deficit in five years.
Bush's spending plan would make his first-term tax cuts permanent, at a cost of $1.6 trillion over 10 years. He is seeking $78 billion in savings in the government's big health care programs — Medicare and Medicaid — over the next five years.
Release of the budget in four massive volumes kicks off months of debate in which Democrats, now in control of both the House and Senate for the first time in Bush's presidency, made clear that they have significantly different views on spending and taxes.
"The president's budget is filled with debt and deception, disconnected from reality and continues to move America in the wrong direction," said Senate Budget Committee Chairman Kent Conrad (news, bio, voting record), D-N.D.
The president insisted that he had made the right choices to keep the nation secure from terrorist threats and the economy growing.
"My formula for a balanced budget reflects the priorities of our country at this moment in its history: protecting the homeland and fighting terrorism, keeping the economy strong with low taxes and keeping spending under control while making federal programs more effective," Bush said.
Just as Iraq has come to dominate Bush's presidency, military spending was a major element in the president's new spending request. Bush was seeking a Pentagon budget of $624.6 billion for 2008, more than one-fifth of the total budget, up from $600.3 billion in 2007. For the first time, the Pentagon figures include what Bush wants to spend to fight the Iraq war, money that in past years was put in supplemental appropriations rather than the regular budget.
Bush projected a deficit in the current year of $244 billion, just slightly lower than last year's $248 billion imbalance. For 2008, the budget year that begins next Oct. 1, Bush sees another slight decline in the deficit to $239 billion with further steady improvement over the next three years until the budget records a surplus of $61 billion in 2012, three years after Bush has left office.
Democrats, however, challenged those projections, contending that Bush only achieves a surplus by leaving out the billions of dollars Congress is expected to spend to keep the alternative minimum tax from ensnaring millions of middle-class taxpayers. His budget includes an AMT fix only for 2008.
Bush projects government spending in 2008 of $2.90 trillion, a 4.9 percent increase from the $2.78 trillion in outlays the administration is projecting for this year. However, the administration notes that the 2007 total is only an estimate, given that Congress is still working to complete a massive omnibus spending bill to cover most agencies for the rest of this fiscal year.
To help achieve what would be the government's first surplus since 2001, Bush is proposing $95.9 billion in savings in mandatory spending, the part of the budget that includes the big benefit programs of Social Security and health care.
Medicare, which provides health insurance for 43 million older and disabled Americans, would see the bulk of those savings — reductions of $66 billion over five years. That would come about primarily by slowing the growth of payments to health care providers.
Additional savings would be achieved by charging higher income Medicare beneficiaries bigger monthly premiums.
While Bush said something had to be done to get control of spiraling health care costs, Congress refused to go along last year with Bush's effort for smaller reductions in Medicare.
Bush would seek to eliminate or sharply reduce 141 government programs for a five-year savings of $12 billion. But many of those reductions he has proposed in past budgets — only to see them rejected by Congress.
Bush once listed overhauling Social Security as the No. 1 domestic priority of his second term. But his effort two years ago to accomplish this goal by diverting some Social Security taxes into private investment accounts went nowhere in Congress. He included the private accounts again in this year's budget. But to minimize the impact, he only showed the program taking effect in 2012, when the private accounts would cost $29.3 billion.
The president's budget also includes an initiative to expand health care coverage to the uninsured through a complex proposal that would give every family a $15,000 tax deduction for purchasing health coverage but would make current employee-supplied health coverage taxable for certain taxpayers.
Bush is also proposing to increase the maximum Pell grant, which goes to low-income students, from the current $4,050 to $4,600. Democrats are pushing for even larger increases.
Bush's energy proposals would expand use of ethanol and other renewable fuels with a goal of cutting gasoline use by 20 percent over the next decade.
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