The Bush Budget Legacy: Misleading Claims and Misguided Priorities

by Adam Hughes*, 2/5/2008

On Feb. 4, President Bush laid out, in a rather slender volume, his federal budget proposal for Fiscal Year 2009, which begins on Oct. 1. Unfortunately, Bush has made little progress toward constructing an honest, fiscally responsible budget that meets the needs of America's communities. In fact, criticisms identical to those levied a year ago against his FY 2008 budget are still quite suitable in their application today — Bush's assumptions about war spending and Alternative Minimum Tax (AMT) reform are unrealistic if not outright spurious. His attempt to balance the budget by 2012 requires massive cuts to Medicare, Medicaid, and other popular domestic investments Congress will certainly not enact. His proposal to terminate or radically cut 151 federal programs is fantastical — wholesale cuts to popular discretionary programs are not only unlikely but are irresponsible in the face of worsening economic conditions.

Most emblematic of the Bush approach to budgeting is found in his deficit forecast for FY 2008. The projected $410 billion deficit is just shy of the record-setting $413 billion deficit set in 2004 only by virtue of a simply unrealistic economic growth forecast. Assuming gross domestic product (GDP) growth at a full percentage point higher than the Congressional Budget Office's (CBO's) assumption (and a half-point higher than Wall Street's), the president was able to avoid printing a headline-grabbing, record deficit number.

It is this kind of dodge that sets the tone of this year's budget proposal. Rather than accept the fiscal challenges of the next few years — the wars in Iraq and Afghanistan, the AMT's reach into the middle class, and basic economic security for potentially millions more jobless workers — Bush has decided to "phone it in" this year and hand off to his successor a budget that is a simple retread of his disastrous policies. He has failed to provide a roadmap to resolving the nation's many fiscal problems and thereby has continued chipping away at our fiscal security. As the latest and last iteration of his fiscal policy record, President Bush's FY 2009 budget proposal has cemented his legacy as a spendthrift whose priorities have eroded middle-class security and left low-income families to fend for themselves in a volatile economy while burying future generations under ever-larger mountains of debt.

Bush Slashes Key Discretionary Investments
While discretionary funding for defense and homeland security receive an eight-plus percent increase this year, President Bush severely cuts back most other areas of discretionary spending, effectively undermining crucial investments in low- and middle-income communities around the country. In sum, non-defense, non-homeland security programs will see only a 0.3 percent increase in this budget (to $393 billion) — a real cut in funding since that increase is far below the rate of inflation and population growth. And these cuts will deepen each year, as the president proposes to freeze this level of funding through the subsequent four years.

The president's proposed FY 2009 cuts are spread out across a host of agencies but particularly target programs at the Departments of Education and Agriculture, which account for more than half of the 151 programs that would be drastically cut or eliminated under the president's budget. The Department of Education would see 47 programs eliminated, including programs that seek to prevent alcohol abuse, improve teacher quality, increase family literacy, and mentor children. Funding for after-school education programs funded through the 21st Century Learning Opportunities program would be cut by 26 percent. The Department of Agriculture would lose 19 programs. The Department of Health and Human Services would see its budget cut by 2.1 percent (4.2 percent when adjusted for inflation).

The Bush administration has again included cuts to several programs that have historically been quite popular in Congress. Major community investments made through the Community Services Block Grant and the Social Services Block Grant would disappear, along with a job training program for migrant and seasonal farm workers and funding for rehabilitating severely depressed public housing units — called the HOPE VI program. The president has tried to eliminate the HOPE VI program every year since moving into the White House, but the program is extremely popular among lawmakers in Congress, who recently voted to renew the program for eight years.

The Commodity Supplemental Food Program, which is designed to improve the health and nutrition of senior citizens, pregnant women and postpartum mothers, infants, and children and feeds close to 500,000 people each month, would be eliminated, and grants to health professionals and rural health care centers would be severely reduced (by 69 and 86 percent, respectively). Further, the Low-Income Home Energy Assistance Program (LIHEAP), which helps low-income families pay their heating bills, would be cut by almost 25 percent, even though at current funding levels, the program only serves one in five eligible households. (Ironically, Senate Democrats are trying to increase funding for LIHEAP in the economic stimulus bill currently being considered.)

All of these proposals have appeared before in President Bush's budgets and have been rejected by multiple Congresses on different occasions. Given many of the proposals have already been met with harsh criticism from members of Congress and outside advocacy groups, it's very unlikely any of these cuts will be instituted this year, further throwing the president's budget deficit projections out of balance.

Massive Impending Spending Once Again Omitted
When President Bush took office in 2001, the national debt was $5.7 trillion and was projected to decline. Seven years later, that number is over $9.2 trillion. Like in FY 2008, the president's FY 2009 budget is an attempt to sweep under the rug this massive run-up of debt by misdirecting attention to what he claims will be a balanced budget in 2012. Yet the only way the president shows a balanced budget on paper is by omitting two huge and almost certain spending items.

The president makes two critical but highly dubious assumptions — that Congress will not reform the AMT and that spending on the wars in Iraq and Afghanistan will be less than $100 billion in 2009, with no war funding at all allocated thereafter. While a complete overhaul of the AMT is not certain, it is likely Congress will continue to make annual changes to the AMT to prevent millions of middle-class taxpayers from falling into AMT liability. These types of changes would cost $168 billion from 2010-2012, according to the Brookings-Urban Tax Policy Center. If the Bush tax cuts are made permanent, this estimate jumps to $243 billion. These costs are unacknowledged in Bush's budget.

A similarly irresponsible assumption about war spending is made in the president's budget: war spending will not exist beyond 2009. Since the president has ruled out a complete withdrawal of troops from Iraq and Afghanistan in the coming year, his exclusion of funding for the wars beyond 2009 is an act of fiscal negligence that serves only to help show a balanced budget. If history is any indication, war costs will be significant for many years to come. From 2001 through 2007, $602 billion has been appropriated for the wars in Iraq and Afghanistan. The Congressional Budget Office projects if the number of military personnel deployed for both wars dropped from around the current level of 200,000 military personnel to 30,000 at the start of FY 2010, it would still cost the Treasury $570 billion through 2017.

President Bush has chosen to ignore these highly probable expenditures in his projections, which destroy his claims of reaching a balanced budget. It is further an indicator of the seriousness with which he has approached annual budget making since the inception of his presidency. From artificially inflated deficit estimates that allow for pats on the back when they fail to materialize to politically unrealistic plans for billions of dollars in cuts from Medicare, Medicaid, SCHIP, and Food Stamps, the president has been more prone to making political statements through the budget rather than actually submitting to Congress a workable spending blueprint. This budget is no exception.

Balanced Budget Gimmicks Enable Case for Making Tax Cuts Permanent
The drastic level of cuts in non-defense discretionary spending in this budget, especially in the out years of the budget window, along with unrealistic assumptions about the costs of the wars in Iraq and Afghanistan and AMT reform, are proposed in order to show, at least on paper, a world where the president's 2001 and 2003 tax cuts can be extended without imperiling his projection of balanced budgets in 2012 and 2013.

In fact, extension of those tax cuts is tremendously expensive and underscores the magnitude of cuts the president is proposing in his new budget. In the Treasury Department's Blue Book, which is a detailed explanation of the administration's revenue proposals for FY 2009, Treasury Secretary Henry Paulson argues the reduced marginal income tax rates and other provisions of the 2001/2003 tax cuts (due to expire at the end of 2010) should be made permanent. Paulson makes no effort to disguise the enormous costs associated with extending these tax cuts — over $2 trillion.

He would have us believe, however, the federal budget can absorb these additional costs, the bulk of which would appear in 2012 and 2013. In those years, the president's budget projects extending the 2001/2003 tax cuts would cost $237 billion and $255 billion, respectively. When the budget's unrealistic assumptions about war and AMT reform costs, as well as politically infeasible cuts to popular programs, are factored in, the idea that the federal budget could come anywhere near balance within the five-year window covered by the proposal requires the willing suspension of disbelief.

Despite the massive cost and questionable economic benefits of the first-term tax cuts, the FY 2009 budget continues to recklessly advocate for their permanent extension without offsets, giving additional benefits almost entirely to the wealthiest in America and continuing to drive massive build-ups of debt. Extending the tax cuts through the budget window would cost $665 billion over the next five years and almost $2.2 trillion over the next ten years, according to the president's budget. These are costs the country is unable to bear.

Effect of Making Permanent 2001 and 2003 Bush Tax Cuts
(millions of dollars)
2008200920102011201220132009-20132009-2018
-422-2,077-13,095-158,453-236,584-255,388-665,597-2,185,294

Bush Continues Misguided Budget Proposals
Rather than laying out a realistic path toward fiscal sustainability with his final budget proposal, Bush has chosen once again to offer a panoply of program cuts and expensive tax cuts. The signature proposal in this budget — $195.7 billion in cuts to Medicare and Medicaid over the next five years — has already been rejected by many in Congress, including Senate Finance Committee Chairman Max Baucus (D-MT), whose committee oversees those programs. The call for an extension of his 2001/2003 tax cuts is also likely to be a non-starter in this Democratic Congress. In fact, even some Republicans have been quick to acknowledge the implausibility of Bush's request. Senate Budget Committee Ranking Member Sen. Judd Gregg (R-NH) commented, "Let's face it. This budget is done with the understanding that nobody's going to be taking a long, hard look at it."

Seven years of Bush fiscal stewardship has resulted in an economy teetering on the brink of recession, falling worker wages, exploding income inequality, and an impending record-setting budget deficit. Because of this, it is not surprising Bush would prefer his successor and Congress to make the hard choices necessary to tidy the fiscal house. This passing-the-buck attitude is readily apparent in the president's $70 billion war funding request the White House acknowledges would "certainly [not] cover all of FY 2009." Instead of a budget that meets the needs and priorities of the country's citizens, the president has drafted a spending plan that is simply a gambit to graft the façade of fiscal responsibility onto his legacy.