White House seeks savings in domestic spending

By Peter Cohn, CongressDaily

President Bush sent a $2.57 trillion fiscal 2006 budget to Capitol Hill Monday that includes $840.3 billion for discretionary programs subject to annual appropriations. The budget plan envisions a 2.1 percent increase in discretionary spending, lower than the inflation rate, and $137 billion in savings over 10 years from cuts to mandatory programs, including Medicaid and user fees such as increased prescription drug co-payments for veterans.

The budget proposes to eliminate or sharply reduce 150 federal programs, saving about $20 billion, and cut overall non-security discretionary spending by almost 0.6 percent, while proposing hefty increases for defense and international programs. The budget forecasts the deficit, originally projected at $521 billion in fiscal 2005, will actually be $427 billion and then decline to $390 billion in 2006 and gradually to $207 billion in 2010.

By 2009, the deficit would fall to $233 billion, meeting the president's target of halving the deficit within four years. But when measured as a percentage of Gross Domestic Product, the deficit would be 1.5 percent of the economy in 2009, which would easily meet Bush's goal.

Under Bush's budget plan, about half of 2006 discretionary spending, $419.3 billion, would be for defense programs, including base construction and housing, a 4.8 percent increase over last year. Homeland Security funding also would rise by about $1 billion to $32.2 billion, a 3 percent increase.

That total does not include funding assumed by a proposal to increase the airline ticket security fee of $3 per flight to $5.50, which rural lawmakers and the airline industry are expected to oppose. Funding for the State Department and foreign aid programs would rise by about 15.7 percent, including a $1.5 billion increase for Millennium Challenge Accounts.

The Housing and Urban Development Department would be reduced by about 11.5 percent from 2005, while the Agriculture Department would be cut 9.6 percent. Other agencies in line for steep cuts include the Transportation, Justice and Labor departments, as well as EPA and Army Corps of Engineers.

The White House is proposing mandatory savings of $44.6 billion over 10 years in Medicaid. Other entitlement proposals include about $8.2 billion in farm subsidy reductions over 10 years and $10.7 billion in savings through changes to student loan programs.

While the administration factored in about $80 billion in 2005 costs related to ongoing operations in Iraq and Afghanistan, the budget shows no war spending in future years, nor does it include the full long-term costs of Bush's Social Security proposals, House Budget ranking member John Spratt, D-S.C., said. Those costs could add $4 trillion to the deficit over the next 10 years, he said.