Newsletter: Bush's Budget of Irresponsibility

Bush’s Budget of Irresponsibility
March 2007

President Bush’s $2.9-trillion budget plan for fiscal year 2008, which begins on October 1, 2007, aims to increase military spending and make his first-term tax cuts for the wealthy permanent while attempting to eliminate the federal deficit by 2012.[1] To pay for these spending increases, the budget also includes several reductions in funding for social programs. The Bush administration says that the tax cuts allow the economy to grow and strengthen, and this will help to increase tax revenues and balance the budget,[2] and presumably, thereby reduce the need for these social programs. But should we be so optimistic about these projections?

The official amount of money requested for the military is $481.4 billion, but this amount ignores some important factors. In addition to the official $481.4 billion, the Defense Department has also requested $141.7 billion for the wars in Iraq and Afghanistan, bringing the total to $623.1 billion.[3] This total does not even include money for Bush’s proposed troop surge in Iraq, and it is already the highest defense budget since the Reagan administration in the 1980s.[4] If other defense-related costs are factored in, such as a supplemental fund for the 2007 war costs, funding for the Dept. of Energy’s development of nuclear weapons laboratories, and money for other agencies (mainly the FBI), then the total comes to $739 billion. When these factors are taken into account, the total, adjusted for inflation, exceeds even the previous defense spending record set in 1952 during the Korean War. Much of this money is to pay for unnecessary wars and expensive weapons to address threats that are hypothetical at best.[5]

On top of all this military spending, Bush also aims to balance the budget by 2012, while at the same time making his tax cuts for the rich permanent. These tax cuts would cost the government $374 billion between now and 2012, but Bush wants to make up for this loss by cutting funding for domestic discretionary programs by 1%. This plan is unacceptable. It would mean that the wealthiest 1% of the population would receive tax cuts larger than the average American household income, while the poor and middle class would suffer from reduced funds for public services such as health care, education, and food assistance.[6]

For example, the Low-income Home Energy Assistance Program (a program that helps low income families to afford heating during the winter) would be cut by 19%. With today’s skyrocketing fuel prices, this would greatly increase the financial burden on the poor and jeopardize their ability to heat their homes. Furthermore, the Commodity Supplemental Food Program (which delivers monthly food packages to poor elderly people) would be altogether eliminated, increasing financial hardship for thousands of low income seniors who can barely afford to buy food. Funding for affordable housing would be reduced by 5.9%, and Supportive Housing for the Elderly and People with Disabilities would be cut 28%.[7]

With regard to healthcare, Bush plans to cut funds to Medicare and Medicaid by about $100 billion over the next 5 years.[8] Although most of the proposed cuts would take the form of reduced payments to health care providers and higher costs for high-income beneficiaries, the income cut-offs would no longer be adjusted for inflation, and this would eventually lead to more middle-class Medicare recipients having to pay the higher fees.[9] Moreover, cuts to Medicaid could lead states to try to cover the cost by restricting eligibility and reducing the number of services available for recipients, which would leave more poor families with inadequate health coverage.[10] Bush’s budget also provides inadequate funding for the State Children’s Health Insurance Program (SCHIP), providing only $4.2 billion over a period of 5 years. According to Sen. Max Baucus (D-Mont.), the program, which already fails to provide insurance for about 6 million children, would require $15 billion just to maintain its current level of enrollment.[11]

The total money allotted to the Department of Education would be reduced by $3.1 billion from 2007 levels. For higher education, although the Pell Grant would increase from $4,050 to $4,600 in 2008 and to $5,400 by 2012, these increases would be offset by the reduction or elimination of 44 other programs,[12] including cuts to the Perkins Loan program.[13] For elementary and secondary education, an additional $1.2 billion would be provided for No Child Left Behind (for a total increase of 41% since the law was enacted),[14] but fundings for special education and Head Start programs would be cut, and by 2012, overall funding for elementary and secondary education would be reduced by $2.8 billion (adjusted for inflation), or 6.8%.[15,16]

Even with all these cuts, it is not certain that the budget will produce a surplus by 2012, as the Bush administration claims. One reason is that it makes optimistic assumptions about the growth of the economy, predicting that tax cuts will improve the economy enough to actually increase tax revenue. According to the Congressional Budget Office (CBO), if the tax cuts were made permanent, they would cost the government $2.3 trillion over the next 10 years.[17] To strengthen the economy, tax cuts for the poor and middle-class would be a better idea, because these groups spend a greater proportion of their income.

Even if the budget does balance, huge deficits will pile up in the long run. Currently the federal deficit, which makes up about 1.8% of the economy, is largely kept in check by a $248 billion Social Security surplus. When the baby boom generation retires, however, this surplus will dwindle and disappear by 2017. Consequently, by 2050 the deficit will make up a whopping 24% of the economy.[18,19] Bush’s spending policies are only making this growth worse,[20] and it is us taxpayers who will have to pay for it in the future.

Bush’s 2008 budget is a fiscally unsustainable plan that unfairly hurts the poor and benefits the rich while spending an inordinate amount of money on unnecessary wars and defense projects. Clearly, it needs to be drastically revised, even rewritten. After the President has submitted his budget to Congress (which has already been done), Congress then has the authority to accept, reject, or modify it.[21] Let us hope that Congress will produce a budget that is both socially equitable and fiscally responsible.

By Suzanne Hodgkins
sbhodgk06@earlham.edu


[1] The Associated Press, “Bush submits $2.9 trillion budget to Congress,” CNN, February 5, 2007, http://www.cnn.com/2007/POLITICS/02/05/bush.budget.ap/index.html.
[2] George W. Bush, “The Budget Message of the President,” in Budget of the United States Government, Fiscal Year 2008 (Office of Management and Budget, 2007), http://www.whitehouse.gov/omb/budget/fy2008/message.html.
[3] Fred Kaplan, “Breaking down the $739 billion defense budget,” Slate Magazine, February 5, 2007, http://www.slate.com/id/2159102/pagenum/all/#page_start.
[4] Ann Scott Tyson, “Bush’s Defense Budget Biggest Since Reagan Era,” The Washington Post, February 6, 2007, A section, page A06.
[5] Fred Kaplan, “Breaking down the $739 billion defense budget,” Slate Magazine, February 5, 2007, http://www.slate.com/id/2159102/pagenum/all/#page_start.
[6] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[7] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[8] Lori Montgomery, “Bush Budget Projects a Surplus by 2012,” The Washington Post, February 5, 2007, A section, page A03.
[9] The Associated Press, “Bush sends $2.9 trillion budget to Congress,” MSNBC, February 5, 2007, http://www.msnbc.msn.com/id/16989248/.
[10] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[11] E. J. Dionne Jr., “Budget Games That Hurt Children,” The Washington Post, February 9, 2007, Editorial section, page A19.
[12] “Summary of the 2008 Budget,” in FY 2008 Budget Summary (U.S. Department of Education, 2007), http://www.ed.gov/about/overview/budget/budget08/summary/edlite-section1.html.
[13] “Programs Proposed for Elimination,” in FY 2008 Budget Summary (U.S. Department of Education, 2007), http://www.ed.gov/about/overview/budget/budget08/summary/edlite-section3.html.
[14] “Summary of the 2008 Budget,” in FY 2008 Budget Summary (U.S. Department of Education, 2007), http://www.ed.gov/about/overview/budget/budget08/summary/edlite-section1.html.
[15] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[16] Amit R. Paley, “New Spending for No Child Left Behind,” The Washington Post, February 6, 2007, page A06.
[17] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[18] Lori Montgomery and Nell Henderson, “Burden Set to Shift On Balanced Budget,” The Washington Post, January 16, 2007, A section, page A01.
[19] David S. Broder, “Happy Talk in Bush’s Budget,” The Washington Post, February 11, 2007, Columns section, page B07.
[20] Robert Greenstein, “Despite the Rhetoric, Budget Would Make Nation’s Fiscal Problems Worse and Further Widen Inequality,” Center on Budget and Policy Priorities, February 6, 2007, http://www.cbpp.org/2-5-07bud.htm.
[21] “The Budget System and Concepts,” in Budget of the United States Government, Fiscal Year 2008 (Office of Management and Budget, 2007), 392, http://www.whitehouse.gov/omb/budget/fy2008/pdf/concepts.pdf.