jump to navigation

Bush Budget Shows US Deficits Disappearing Over 5 Years February 5, 2007

Posted by notapundit in US News, White House.
trackback

WASHINGTON (Dow Jones)–Healthy tax receipts and economic growth will help the U.S. federal deficit decline to $244 billion this year and $239 billion in fiscal 2008, the Bush administration said Monday in a budget request that predicts the disappearance of government red ink by 2012.

“The federal deficit is declining and on a path to elimination,” President George W. Bush said in his fiscal 2008 budget blueprint. “With continued strong economic growth and spending discipline, we are now positioned to balance the budget by 2012, while providing for our national security and making tax relief permanent.”

The budget request, which will provide the basis for the debate on taxes and spending between the White House and Capitol Hill, forecasts a $61 billion surplus in fiscal 2012. If it materializes, the surplus would be the first since 2001, and a dramatic improvement from 2004’s record budget gap of $413 billion. Last year, the deficit totalled $248 billion.

The White House’s figures will draw skepticism from Congressional Democrats. The budget includes a sharp drop in funding for the war on terror beyond fiscal 2008 and tighter spending on entitlements. It doesn’t show the cost of a long-term fix to the Alternative Minimum Tax. And it would extend Bush’s tax cuts permanently, which Democrats say would dramatically worsen the nation’s finances.

For fiscal 2008, which begins in October, the budget proposes total outlays of $2.90 trillion and receipts of $2.66 trillion. While boosting funding for the Pentagon and the wars in Iraq and Afghanistan, the budget imposes restraint on non-security discretionary spending, which would grow at 1% over five years, and proposes $96 billion in savings from entitlement programs during the same period.

“Although this only represents 1% of mandatory spending, it lays the foundation for more comprehensive reforms that are needed to insure that these crucial programs continue providing health and retirement security for future generations,” the White House said.
Spending Restraint

The proposed savings in mandatory programs would grow to $309 billion over 10 years, including $66 billion in savings in Medicare and $6.8 billion in Medicaid and the State Children’s Health Insurance Program over five years. To generate the Medicare savings, the budget would permanently adjust provider payments, which the White House says would encourage efficiencies and take advantage of medical technology. On Medicaid, the budget proposes a package of “program integrity reforms” intended to reduce the rate of growth from 7.7% to 7.6% over 10 years.

The budget also proposes a boost in premiums paid to the Pension Benefit Guaranty Corp. by corporations with defined-benefit pension plans, providing $5.5 billion over five years.

“The nation continues to face pressing long-term fiscal challenges arising from our key entitlement programs,” the White House said. “The mandatory savings proposals in the 2008 budget will not solve the government’s long-term fiscal challenges, but they are an important and meaningful step, producing a significant improvement over the long term,” the White House said.

Bush again called for a bipartisan effort to fix the Social Security system, an effort that Democrats have resisted due to the White House’s insistence that private retirement accounts be a part of the solution. The budget encouraged both parties “to bring different options” to the table.

The budget, however, reflects Bush’s plan to let workers use some of the Social Security payroll tax to fund voluntary retirement accounts. Beginning in 2012, workers would be able to use up to 4% of their Social Security taxable earnings, up to a $1,300 yearly limit, to fund the accounts. That would cost $29.3 billion in 2012.

On the non-security discretionary spending side, Bush again called for 141 government programs to be scrapped, saying that would save $12 billion. He repeated his appeal for earmark reform and again asked lawmakers to grant him the authority to veto specific items in spending bills. And he proposed statutory caps on discretionary spending each year through 2012, which would reinstate expired controls under the Budget Enforcement Act of the 1990s.

The budget’s modest restraint on non-security spending only partially offsets spending on the war on terror, which Bush called his “highest priority.” For the first time, the budget details the projected full costs of the war on terror for the budget year, as well as a down payment on expected 2009 war funding.

For fiscal 2008, the administration asked lawmakers to approve $145.2 billion for the global war on terror, an amount that is expected to be highly scrutinized. The White House also asked for $99.6 billion in emergency supplemental funds for the war in the current year, raising the total cost of the effort in Iraq and Afghanistan for fiscal 2007 to $170 billion.

In later years, the White House asked for just $50 billion in preliminary funds for the war in 2009. “Actual funding needs will be determined by conditions at that time,” the White House said. The budget includes no war funds beyond 2009.

In his budget message, Bush touted the economic benefits of his tax cuts, and called for the tax relief enacted in 2001 and 2003 to be made permanent. Doing so would cost $1.62 trillion over 10 years.

Still, the White House believes that extending tax relief will prod economic growth, and keep revenue growing at a healthy pace. The budget sees revenue growth averaging 5.4% over six years, below last year’s torrid rate of 11.8%. As a result of healthy revenue growth, deficits as a percentage of gross domestic product are projected to decline from 1.8% in fiscal 2007 to 1.6% in 2008 and 1.2% in 2009.

The budget also details for the first time the costs associated with one of the signature proposals in Bush’s State of the Union address, his plan to provide a flat tax deduction for healthcare coverage. In fiscal 2009, the proposal would cost $31.4 billion. Over five years, the cost would rise to $121.2 billion. Over a decade, however, the proposal would bring in $5.2 billion, according to the White House.

By Henry J. Pulizzi, Dow Jones Newswires

Comments»

No comments yet — be the first.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: