Tags: Bush | budget

President Bush to Propose $3 Trillion U.S. Budget

Sunday, 03 Feb 2008 07:42 PM

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WASHINGTON -- President George W. Bush will on Monday unveil a $3 trillion budget that likely will spark anew the wrangling between the White House and the Democratic-led Congress over Iraq war funding, tax cuts and the sagging economy.

While Democrats and the White House are cooperating on a $150 billion package to help the economy, the president's budget - the last of his administration - also will include deficit forecasts that could further darken the outlook.

With the threat of a recession and an expensive stimulus package looming, experts question whether Bush can cut spending and fulfill his pledge to balance the budget by 2012 and whether he can convince Congress to make permanent the tax cuts that expire in 2010.

Jason Furman, a senior fellow at the Brookings Institution, said he doubted either side would make much headway in advancing their agendas in the budget.

"It doesn't seem plausible to me that these spending cuts are going to be enacted or that ... we're going to see any tax changes," he said. "In the last year of a presidency and a Democratic Congress, I don't think this budget will have any more life than the average budget."

Vincent Reinhart, a former Federal Reserve official and now a scholar at the American Enterprise Institute, said current economic conditions do not help the Bush cause.

"It makes it harder to meet their benchmarks on deficit reduction and also makes it harder to press the case for making the tax cuts permanent," he said. "It just makes the situation harder."

NON-DEFENSE SPENDING FREEZE

To try to ease concerns among his own Republicans who have criticized the president for tolerating big spending increases in the first several years of his tenure, Bush plans to freeze most domestic non-defense spending and unveil about $208 billion in savings from health-care programs over five years.

Reining in the Medicare and Medicaid health programs for the elderly, disabled and poor drew fire from Democrats who said Bush's plan was misguided and promised a fight.

"The president should work with Congress to create a budget that recognizes that affordable health care is a priority," said House of Representatives Speaker Nancy Pelosi, a California Democrat.

The White House also plans to ask for $515 billion for the Pentagon, plus another $70 billion to fund the war in Iraq and elsewhere for the first few months of fiscal year 2009.

The White House will later request more money for the war, a move likely to further anger Democrats who have accused Bush of masking the true costs of the war by not fully detailing them in his budget.

The White House requested some $190 billion for the Iraq war for fiscal 2008, which began October 1, 2007, but Congress has only approved $70 billion, preferring to hold back some money so it can also assess progress and again try to attach a timetable for withdrawing U.S. forces, which Bush opposes.

In addition to extra war funding, the White House plans to ask for billions of dollars more to boost border security, a move aimed at soothing Republicans who want to crack down on the 12 million immigrants in the United States illegally.

The Department of Homeland Security said it wants to spend $775 million to build more border fences, $440 million to hire and train more border patrol agents and $3 billion in other enforcement activities.

The looming budget battle comes amid a sharp slowdown in the economy that some fear could turn into a recession. The White House also is expected to forecast budget deficits of about $400 billion for both fiscal 2008 and 2009.

Growth was the weakest in five years in 2007, unemployment is rising and the housing market is still reeling, all of which have sent global financial markets swooning.

Nonetheless, the White House has said it plans to stand by its November forecast that the economy will grow 2.7 percent in 2008 with no chance of recession.

"I think you have to look at their numbers and consider more risk to the downside," Furman said.

The Blue Chip panel of private forecasters has projected economic growth of 2.2 percent this year and sees a 38 percent chance of recession.

© Reuters 2007. All rights reserved.

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