Initial Analysis of the President's 2007 Budget
The president's Fiscal Year 2007 (FY 07) budget would set the nation on a dangerous fiscal path and does nothing to honestly address the federal government's looming budgetary challenges. The budget--totaling $2.77 trillion--would make permanent the president's first-term tax cuts, which primarily benefit the wealthy, and pay for those cuts in part by cutting some entitlement programs and drastically reducing domestic discretionary spending (outside of homeland security and defense). Despite the spending cuts, deficits will continue to rise each year after President Bush leaves office if this budget is enacted.While the accuracy of its portrayal of likely future expenditures and costs of tax cuts is improved over last year's, the president's budget still falls far short of an honest depiction of our country's current predicament and outlook. New to the budget this year is some spending for the ill-fated Social Security overhaul presented by the president last year. Some war spending (although not all of it) is also included for the first time, as well as the cost of a one-year Alternative Minimum Tax fix. While the first budget to show the initial costs of making the president's tax cuts permanent, however, this budget misrepresents the long-term fiscal picture and the havoc such cuts could wreak were they enacted wholesale.
This budget would be devastating, eroding the nation's tax base, forcing harsh cuts to non-defense discretionary spending (16 percent over five years), and continuing to promote the administration's dangerous and biased "program assessment" tool.
Extension of Tax Cuts Projected for One Year
This is the first year that the impact of extending the president's first-term tax cuts is recorded in his budget. Because the administration chooses to submit five-year budgets and most of the president's tax cuts expire on Dec. 31, 2010, previous budgets failed to present a realistic picture of the impact of extending those tax cuts. This budget is only marginally better.
The president's budget shows extension of the tax cuts for one year--in 2011--the last year of the five year budget window. According to the White House, these cuts will cost approximately $119 billion in 2011 alone--more than half the amount needed to close the budget deficit that year, estimated to be $225 billion.
The president, as he explained in his State of the Union address, would like to make all of his tax cuts permanent. His budget, however, does not show the year-by-year details of the revenue impact of that policy change beyond 2011. Instead, it simply presents the total cost over 10 years for extending the tax cuts to be $1.7 trillion without factoring in service on the national debt, which brings the estimated cost up to as much as $2 trillion.
Extending the tax cuts will sharply increase budget deficits (and thus the national debt) after the president leaves office. This, coupled with other changes proposed by the president, would cause a steady deterioration of the nation's fiscal health, adding $3.6 trillion to the national debt by 2011, according to the president's own budget projections. This represents a monumental 46 percent increase in the size of the debt over 2005 levels. Looking at the president's policies over the long-term, the year 2009, when he has pledged to halve the deficit, seems like the calm before the storm.
Domestic Discretionary Spending Squeeze
As with previous budgets, discretionary spending is slated for large cuts in the FY07 budget. Discretionary spending includes programs from job training and environmental protection to scientific research, human services, veterans and education programs. Accounting for only a small percentage of the overall budget, discretionary spending would bare a disproportionate share of the proposed cuts in FY07.
Particularly alarming are not any of the specific cuts in FY07, but the president's vague plans for the following years. The president proposes discretionary spending caps for each year until 2011. Defense spending would receive its own cap from 2006 to 2008. From 2009 to 2011, defense would be combined with non-defense spending under one cap. Highway funding and mass transit programs would each have their own category from 2006 through 2011, and would not compete with other programs.
Under this accounting, homeland security would be part of the non-defense discretionary cap and would compete with human services and other programs. The president has made some assumptions about how much non-defense spending would go to homeland security, but if Congress increases that amount, it will have to lower spending in other non-defense discretionary programs.
Under the president's assumptions, non-defense programs--outside of homeland security--would be cut a whopping 16 percent between FY 2006 and FY 2011 when adjusted for inflation. This is more drastic than last year's budget, which we calculated reducing this category of spending by 14 percent over five years (see /files/budget/FY06budgetimpactonnonprofits.pdf).
Actual 2005 2006 2007 2008 2009 2010 2011 % Change 2006-2011 % Change Adj. Inflation 2006-2011
Defense 390 432 460 482 501 521 542 25.5% 10.8%
Homeland Security from Non-Defense 36 38 40 42 42 43 45 18.4% 4.6%
Non-Defense 389 373 370 371 374 364 353 -5.4% -16.4%
Particularly hard hit by such cuts would be nonprofit service providers and research organizations. In light of the obvious increase in need that will result from a population that is both aging and growing, such an enormous cut to spending would be devastating.
PART Scores and Continued False Rhetoric About Performance Measures
Once again the president's budget places still more emphasis on performance management and the Program Assessment Rating Tool (PART). Though touted by the current administration as a consistent, unbiased way to determine the success or failure of government programs, the tool actually contains numerous inconsistencies and political and ideological biases, documented by OMB Watch (see /files/regs/2005/performance/PARTbackgrounder.pdf).
OMB initially tested the PART on a limited number of programs (67) in the spring of 2001. It was then reviewed by the Performance Measurement Advisory Council, an ostensibly independent committee that lacked stakeholder representation or public interest perspectives. OMB made minor revisions, but the format of the PART remained generally the same.
Each year since, the PART has been used on 20 percent of all government programs/activities (approximately 200 per year). With the release of the FY07 budget, the PART has now been used to review 80 percent of federal programs (793).
This year OMB has simultaneously made PART data more and less accessible. OMB has increased the PART's exposure and simplified the data by launching a new website with a user-friendly, searchable database format that displays less information. In doing this, OMB has removed the comprehensive information that the White House once published, which would allow analysts, federal employees, and regular citizens to get an overview of PART and look across the entire universe of information for broader patterns across programs.
Like last year, the president's budget does not present a list of the 140 programs slated for reduction or elimination due to their ineffectiveness or irrelevance. The lack of transparency further calls into question whether poor PART scores are, as the administration claims, the real reason behind attempts to abandon these programs.
This seems par for the course with the PART, a political tool with scoring methodology that is inconsistent and opaque. The PART continues to be a political lever the Bush administration pulls to further ideological goals under a smokescreen of good government and results.