PRESBUDGTFEB9

{Note: TheWeekInCongress does not report the President's Budget Proposal in any great detail for several reasons: budget proposals are rarely if ever accurate out five years let alone ten therefore the only data of significance is the money to be spent in the forthcoming fiscal year. It is merely the president's idea of how the money should be spent. The other reason is that the test of the relevance of the president's calculations is how well they are reflected in the congressional budget resolutions that follow, and TheWeekInCongress.com reports those bills in complete detail including reference to how the data matches the president's wishes. The congressional authorization and appropriation bills will be debated beginning around March, Ed.}

This document begins the Federal budgeting process for the fiscal year beginning October 1, 2007 through September 30, 2008. Next will be a congressional budget resolution that may or may not follow the President’s wishes. Then comes a series of authorization bills that establish, end or continue programs and provisions in each of the Federal Departments and related agencies. After authorizations then comes the appropriations bills in which actual amounts of money are committed to the departments, agencies and their programs. The final piece is the budget reconciliation that results from combining the appropriation decisions, rescissions and unexpended funds into what is recognized as a budget.

The President's budget is never voted on and neither it or the Congressional budgets ever become laws. The Appropriation and Authorization bill are signed into law by the President.

Congress is charged with completing the budget by September 30 of each year but has failed to do so in at least ten years. Most budget years were completed by mid-December or earlier with the exception of the Fiscal Year 2007 Congressional Budget Reconciliation that was never completed by the 109^th Congress resulting in the need for a continuing resolution that will continue spending with some increases and decreases based on the most recent passed budget that of Fiscal Year 2006, passed in 2005.

The President’s Budget would spend $2.9 trillion dollars most of which will be spent on the Department of Defense and the Global War on Terrorism. The President wants $245 billion to continue the war in Iraq and Afghanistan and the world-wide war on terror and the cost does not include military construction and veteran and veteran health spending. He is proposing $481.4 billion (11% increase) for the Department of Defense. $525 million is asked for the State Department operations in Iraq this year

Nearly $1 trillion would be spent on discretionary spending, spending that Congress can raise or lower to fund various programs and agencies, but not for entitlement spending such as for Medicare and Medicaid and programs to help the poor.

Entitlement spending is set for a total cut of over $95 billion through 2012 and a cut of over $300 billion through 2017. Most of those cuts-$66 billion through 2012 and $252 billion through 2017-would be taken from Medicare, the President proposes.

While presenting the largest budget and perhaps the most significant spending cuts in the Nation’s history the President is also proposing to balance the budget and produce surpluses by 2012. The primary engine for producing the necessary amount of revenue to meet his goals is his tax cuts. Most of the President’s preferred tax cuts were extended until 2010. The administration holds that the tax cuts have freed investment income that resulted in today’s robust economy and steady reduction of the deficit by lowering spending and increasing revenues.

But it ‘takes money to make money’ as the old saying goes. The President wants to see his tax breaks made permanent but such a reduction in taxes is also a reduction in revenues costing an estimated $373 billion through 2012 and $1.62 trillion through 2017. Although few if any budget proposals are valid out ten years or even five years, the belief would seem to be that continuing the tax breaks will continue the tax revenue-producing business and job growth attributed to them thus far.

The President while working off $70 billion already approved for Iraq, Afghanistan and the war on terror is asking for an additional $100 million for this current fiscal year and then another $145 billion for fiscal 2008 beginning in October 2007. Total defense spending without considering Veterans and Homeland Security would total to $726 billion nearly equaling all money spent for war since 9-11 when the country went on a war footing. Spending for Veterans is proposed at $83 billion, Homeland Security is budgeted to spend $43 billion and State would get $525 million bringing the entire proposed budget for defense and security to just over $850 billion.

Healthcare savings would come from proposed cuts to Medicare in the form of reduced Medicare payments to health-care provider institutions such as hospitals, care centers and nursing homes. An increase in prescription drug premiums under the Medicare program for wealthier beneficiaries is proposed.

The alternative minimum tax began around 1969 to prevent wealthy tax payers from escaping paying taxes at all. The program affected a small percent of the population back then but was not adjusted for inflation. The results, nearly 40 years later, is that those earning in the upper-middle class income levels are finding that the AMT is kicking in requiring an extra tax burden. CBO concludes that if unchanged the AMT will be impacting half of the families with incomes around $100,000 in five years and for those earning less in ten years.

The President’s budget appears to limit the AMT for a couple of years after which it can expand again.

INDEX PAGE FOR BALANCE SHEETS OF EACH DEPARTMENT

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