TheWeekInCongress.com
The President’s Budget for Fiscal Year 2007
(As Submitted to Congress on February 4, 2006)
In its most basic intent the President’s $2.7 trillion budget aims to further reduce spending and ultimately the budget deficit now reaching record highs. He proposes cuts to 141 government programs, reductions in social services spending and continued reduction in taxes to accomplish the job. How the deficit is measured this year, however, has a new twist: the deficit would be measured not by an actual amount ($318 billion) but by the percentage of the Gross National Product that amount represents.
To the White House high deficits are of no consequence when they are a low percentage of the GDP. High percentage is ‘bad’, low percentage is ‘good’.
In 2004, White House budget data says, the “2004 deficit was 3.6 percent of GDP, or $413 billion, and the 2005 deficit fell further, to 2.6 percent of GDP, or $318 billion.”
The percentage of GDP approach is relevant now because the White House expects budget deficits to rise until 2010 and then drop dramatically.
The 2006 deficit is likely to be $423 billion but still only 3.2% of the GDP. So the deficit will increase from 2005’s $318 billion to $423 billion in 2006 (up $5 billion) but the percentage in relation to the GDP will fall to 3.2% or .4% less than 2004’s 3.6%. And when measuring today’s deficit as percentage of GDP it is better than “the deficits in 11 of the last 25 years.”
All economic gains, then, will be the result of a healthy economy that increases the GDP and so the President continues to encourage Congress to make permanent the existing tax cuts and introduces the American Competitiveness Initiative, a national effort to increase math and science education, train for high-tech jobs and encourage entrepreneurial efforts.
But spending still needs to be watched. The President proposes cutting all non-security discretionary spending to a level below last year, holding all discretionary spending below the rate of inflation, and reducing or eliminating government programs that aren’t performing as he thinks they should. It should be noted that several programs such as the National Institute of Health, veterans programs and others will see an increase for the 2007 budget year but decreases in spending below this year’s levels in near future years through 2009. In that sense, much of this budget is a one year budget requiring a revisit to many programs and agencies each year to determine how much money they should get.
The expected rise in entitlement spending around 2010 is to be dealt with by straight forward cuts or reductions in funding. Congress is already into its first year of the five year plan to cut social programs by $40 billion but the White House budget is calling for $65 billion more in spending reductions from those programs including Medicare, Medicaid and Social Security through 2009.
The President projects that by 2009, due to continued tax relief and continued non-security spending reduction, the deficit will be $218 billion or 1.4 percent of the projected GDP.
All spending will not be reduced or leveled. The President’s priorities as reflected in the budget would increase defense spending by 7%, homeland security spending by 8%, the newly crafted American Competitiveness Act would take $5.9 billion in 2007 and $136 billion over ten years, $322 million in faith-based and community organization projects, the VA will see an additional $2.5 billion for healthcare needs in 2007.
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MORE INFORMATION
BUDGET HIGHLIGHTS FROM THE WHITE HOUSE
WINNERS AND LOSERS by department and agency.
MISCELLANEOUS provisions.
BUDGET HIGH LIGHTS FROM THE WHITE HOUSE
The Budget continues the President’s pro-growth policies vital to our economy’s continued expansion. With the full implementation of the President’s tax relief plan in 2003, the Nation has added more than 4.7 million new jobs, productivity has increased at a 3 percent annual rate, homeownership has reached all-time highs, and the American economy is growing faster than other major industrialized nations.
Through continued pro-growth economic policies and spending restraint, the Budget keeps us on track to meet the President’s goal of cutting the deficit in half by 2009. The Budget:
The greatest threat to our fiscal health over the long-term comes from unsustainable growth in entitlement programs such as Social Security, Medicare, and Medicaid.
The Budget focuses taxpayer resources on National priorities like the War on Terrorism, health care, energy research and strengthening our global competitiveness through improved math and science education and research.
WINNERS AND LOSERS
Agriculture Department Cut food programs for the poor including the program for Women with Infant Children and home ownership programs; increases in food supply security; flu prevention; poultry vaccine; temporarily increases spending for food safety and inspection. cuts in Forest Service; rural development programs; commodity support; conservation programs;
Alternative Minimum Tax No provisions included in the budget.
Commerce Department Spending down overall but increased for the American Competitive Initiative designed to increase research tax credits and for National Institute of Standards research. Cuts for weather satellites; increases for NOAA;
Defense Department Spending up 7 percent includes $50 billion for war on terrorism with an expected $100 billion request for Iraq and Afghanistan to be requested later; increased spending for weapons and weapons systems; 2 new Navy destroyers; increased R&D; 2.2% pay increase following a 3% increase last year. Increases in research; repairs; end strength; Navy vessels; aircraft drones; environmental cleanup.
Discretionary Spending (Non-security) government-wide cuts from $492 billion to $455 billion in 2011.
Education Department Spending up in 2007 and down thereafter, but increases to $380 million for programs to train 70,000 new teachers in and lure students into math and science expertise and draw private sector professionals to the teaching field; cuts over forty programs; brings back vouchers to subsidize tuition for private and religious schools; cuts to student aid programs as much as fifty percent over five years; non-curricula programs cut; Vo-Tech cut.
Energy Department Proposes again to drill for oil in the Arctic national Wildlife Refuge to raise revenue from sale of oil leases; cuts in spending to support use of natural resources for energy production; energy saving programs; research. Increased spending for Office of Science research and research for emission-free coal burning electric plants, solar power, nuclear expansion and wind power. More funds, too, for creating energy from bio-mass waste although funding for those initiatives are minimal ($5 million for wind research, $64 million for solar research);
Environmental Protection Agency Grants cut for state clean air programs; across the board cuts.
Health and Human Services Cuts in commodity price supports; food stamps; and professional training programs and treatment of brain trauma victims. Tax breaks for establishing a health savings account connected to an insurance policy; would give a tax break for health plan premiums and for out of pocket expenses; cut funds to Office of Minority Health. Upgrade emergency medical care for children. Increase spending for FDA.
Homeland Security up 8 percent; increase airline passenger security fees from $2.50 to $5.00; increases border agents and border spending but cuts Anti-terror grants to local law enforcement;
Housing and Urban Development cuts to Community Development Block Grants program and move them under the Dept of Commerce; eliminate Hope VI (program moves poor to better neighborhoods); reduction in rental housing support for the poor; increases low-income housing support.
Interior Department Lost funding, more money for energy resource development (public resources)
Iraq and Afghanistan No funds were requested although the Defense budget includes spending there and a $120 billion supplemental request is expected this spring of 2006.
Justice Department Across the board cuts, increases for FBI, drug enforcement.
Labor Department Mine safety and health gets an increase and then a reduction over ten years; FEMA gets an increase; replace job programs with career advancement accounts for training or tuition costs; more for OSHA.
Medicare Reduce spending by $36 billion in five years and $105 billion in ten years; no changes to prescription drug program or payments to doctors; reduces payments to medical support services such as ambulances. Proposes the health savings account, a combination of tax-free savings account and a high deductible/low premium insurance policy for major medical problems;
Medicaid More cuts to total $4.9 billion including state children's health insurance and child support enforcement.
NASA Small increase - 1% for exploration; technology; reductions in personnel spending.
National Institutes of Health Spending decreases over ten years, but more is put into avian flu and bio-terror preparedness; reduction in spending for disease preventative programs;. National Cancer Institute sees an overall cut. Center for Disease Control Across the board cuts but spending shifted to help state and local agencies prepare for pandemic response.
Social Security Proposes another overhaul to cost $712 billion over ten years.
State Department increased spending for spreading democracy and culture; educating foreign students; foreign language training; Millennium Challenge; and the new civilian staffed international response team.
Tax cuts $1.35 trillion over ten years.
Treasury Department-Taxes shift funding away from taxpayer services to tax enforcement; does not address Alternative Minimum Tax; make capital gains tax cut permanent;
Transportation Department Funds Amtrak in the Northeast corridor but proposes cuts to un-profitable services elsewhere; across the board cuts; more funds for the FAA.
Veterans Affairs Vets to pay more for medical care; higher co-payments for vets with no service-related injury; proposes new, general fee for using federal healthcare.
1. By eliminating or reducing the scope of 141 programs not getting results of not meeting essential priorities the President would save $14.7 billion over five years but about 90 of the programs proposed have been proposed to Congress before and were not cut, some actually were increased.
2. The President is requesting that Congress grant him the authority for a line-item veto despite that having been proven unconstitutional by the Supreme Court about ten years ago.
3. Seeks pre-authorization of special pay rates and pay increases for hard to fill government jobs.
4. Allow Blue Cross and Blue Shield to offer health plan that would include catastrophic coverage, a high deductible / low premium and a health savings account to federal employees.
5. Proposes the federal budget be created every two years rather than yearly.
6. The economy is projected to grow, the deficit is expected to decrease and the ratio between the deficit and the GDP, now 3.2% is expected to reach 1.4% in 2009 when the deficit is supposed to be $208 billion.
7. $322 million to faith-based and community programs including the First Lady's Helping American Youth program (HAY)
8. Proposes statutory limits on discretionary spending.
9. Launches the ExpectMore.gov program by which all government programs are assessed in terms of performance, responsiveness, relevance and accountability.