President Bush sent his proposed Fiscal Year 2006 (FY 06) budget to Congress on Monday, Feb. 7, in a package that is one of the most special-interest-driven budgets presented in a very long time. The new budget calls for a large transfer of benefits to corporate special interests and the most well-off through additional tax cuts, regulatory and litigation "reforms," and other measures that weaken public safeguards and government in general. At the same time, the president proposes cutting programs serving low- and middle-income Americans. The budget calls for a trade-off that is both unfair and unwise. The Bush tax cuts enacted since 2001 have resulted in federal revenue now being reduced to the level it was in the 1950s as a percentage of the economy. Faced with this prospect, it might seem prudent to roll back the cuts to raise revenue to meet today's needs. But the president proposes extending the tax cuts that largely are targeted to the wealthy and making them permanent, adding another $1.6 trillion to an already burgeoning federal debt. This alone would be fiscally irresponsible. Irresponsibility, however, is only one part of the equation. The president's solution to the growing debt is to reduce the annual deficit by cutting programs that serve you and me. The president believes that tax cuts for wealthy families are good for the country. For example, he proposes that inherited wealth, regardless of its size, should not be taxed. Currently, families may pass on $3 million ($1.5 million if single) tax free to their heirs, but he wants all wealth to be tax free. For families with estates larger than $3 million, they are forced to pay taxes, unless they have taken advantage of various provisions to reduce their taxable amounts. For example, they may give an unlimited amount to a charity to reduce the value of the estate. Under the president's proposal, the estate tax would be permanently repealed; heirs would be able to receive entire estates without any taxation. To pay for this policy, the president proposes to cut or eliminate around 150 non-defense programs. Nearly 50 education programs, such as vocational education, would be eliminated, along with large cuts in others such as the safe and drug-free schools program. The president also makes cuts in programs that directly affect community services including major economic development cuts such as to Community Development Block Grants (CDBG). Discretionary programs take the brunt of the president's proposals. But FY 06 will not be the worst year for non-defense discretionary programs. The president proposes enforceable discretionary spending caps that are very restrictive for non-defense discretionary programs. (See related article on budget process reforms.) Defense spending would be allowed to grow by $42.4 billion from FY 05 to FY 07, while non-defense discretionary spending would be cut by $300 million over the same period. This would be bad enough, given it means that services will not be able to keep up with inflation and increases in demand. But from FY 08 through FY 10, the president proposes that defense and non-defense discretionary spending be joined under one cap. That means that increases in defense spending will come out of the hide of non-defense discretionary programs. The president's budget is not only tough on agencies such as Housing and Urban Development, Environmental Protection Agency, Education, and Agriculture, it also raises questions about homeland security priorities. For example, the number of border guards requested do not even come close to the number identified in an intelligence bill President Bush recently signed. Additionally, while more money was requested for first responders, the allocation formula has changed. Under the president's plan, smaller communities will receive less or no money for homeland security. Combined with cuts in CDBG and other domestic programs, this will present a major problem for mayors across the country. It is also likely to put pressure on members in Congress, who will be asked to protect federal funding going to their districts. The president also lays some markers on entitlement programs. He proposes $137 billion savings over 10 years. The largest amount, roughly $44.6 billion over 10 years, would come from changes in the amounts states will receive for Medicaid. In exchange for less money to the states, the president proposes to provide states with "more flexibility in determining Medicaid eligibility and how benefits are delivered." This translates into enormous pressure on states still reeling from their own fiscal crises to cut Medicaid benefits or restrict eligibility. The president also proposes changes to Title IV-E of foster care that would give states "flexibility" in financing. The proposal was put forward previously and rejected by Congress. Worse yet, the president also proposes significant budget process reforms. These, too, are highly political and designed to constrain discretionary entitlement and discretionary spending. The highly successful pay-as-you-go (PAYGO) rules used in the 1990s give way to a new Bush plan. Under PAYGO, tax cuts had to be paid for by increasing other revenues or cutting entitlements; similarly, entitlement increases had to be offset with other spending reductions or tax increases. Under the Bush proposal, only entitlement programs would be covered by the PayGo rules; taxes would not be. This is obviously to keep from increasing taxes and to promote additional tax cuts. Overall, the president proposes a budget of just under $2.6 trillion, laying out a blueprint for slashing many domestic programs while raising spending on the military and homeland security. This budget sends a powerful signal about national priorities, creating tradeoffs between the very rich and the rest of us. In some respects this budget is the by-product of a right-wing strategy for defunding the federal government. The plan is to slash taxes so there is less federal revenue, forcing huge increases in the deficit, thereby creating a manufactured crisis that calls for spending cuts. Congress must resist the president's message and recognize that there are national needs that cannot be ignored. While program efficiencies should always be sought, Congress must provide an adequate revenue base to meet public needs. A Runaway Debt Has a Price It took since the beginning of this country until 2000 to amass a $5.6 trillion debt. But President Bush will have nearly doubled it by the time he leaves in 2009. The debt is scheduled to rapidly rise every year from this point on -- and that increase is also true as a percentage of the economy. A rising national debt has consequences. It means that the country must borrow more money for which we will have more annual interest payments to make. In FY 04, we spent $160.2 billion on debt interest. By FY 10, we will spend $313.9 billion -- nearly double the amount paid six years earlier. These are such large numbers that it is sometimes difficult to imagine their magnitude. But $313.9 billion in FY 10 is roughly equal to all government outlays excluding defense, Social Security, Medicare, income security and other health programs. It could fund all programs dealing with education, employment, social services, energy, community and regional development, international affairs, agriculture, and general science, and still have money left over. Put another way, interest on the debt in FY 10 will equal the cost of running the Departments of Agriculture, Commerce, Education, Energy, Interior, Justice, Labor, State, and Housing and Urban Development. A Slick but Misleading Budget The president presents a snappy budget, complete with pretty photos on slick paper. His Management Agenda includes a Program Assessment Rating Tool (PART) - a five-part scoring system to rate programs - and a Standards for Success that provides green, yellow or red dots as a scorecard on achieving agency goals. The president also has each agency address his presidential goals, which include:

• Promoting economic opportunity and ownership;
• Protecting America;
• Supporting a compassionate society;
• Making government more effective;
• Agency-specific goals.

In addition to his tax policies, the president also notes the need for litigation and regulatory reform. On litigation reform, the president calls for changes on medical liability, class action law suits, and asbestos litigation. On regulatory reform, the president emphasizes the need to address the costs of regulation, as well as the need to review regulations periodically for "relevancy." (See related article on management changes being proposed.) All of this provides an impression of transparency and efficiency. But this is a thin veneer. The good-sounding words are not followed with substance to back them up. And what substance is provided tilts heavily in favor of special corporate interests, not the public interest. On litigation and regulatory reform, these are special interest favorites pushed by industry and conservatives. On management reforms, the PART gives the White House Office of Management and Budget authority to assess programs, helping to politicize results. The presidential goals sound nice, but, as described above, fraught with large budget cuts. Supporting a compassionate society may increase faith-based groups in getting government grants, for example, but there are fewer resources with which to do the work. In other words, faith-based groups may get a larger piece of the pie, but the pie itself is getting much smaller. The issue is not just a slick budget with a very political agenda, it is also that the numbers used in the budget present a misleading picture by:

• Providing discretionary spending details for only one year, instead of multiple years as is the tradition. The result is that the budget does not show the full impact of proposed cuts - even though the president proposes discretionary spending caps that will force large cuts in future years.
• Not providing the costs for making the Bush tax cuts permanent.
• Not including the cost of the continuing wars in Afghanistan and Iraq. For 2006 and beyond, the president provides no figures.
• Not including the cost of his Social Security reform plan, which is projected to cost $754 billion in its first five years, $1 trillion to $2 trillion over the first decade, and around $4.5 trillion over 20 years.
• Not counting the $774 billion ten-year cost of reforming the Alternative Minimum Tax.
• Claiming to cut the deficit in half over four years when in fact the president uses an earlier inflated estimate of the deficit to serve as the baseline from which to show cuts. Inevitably, the reduction in the deficit will be misleading because of all of the above factors and for one other reason, Congress is unlikely to accept the president's proposal to eliminate nearly 150 non-defense programs.

Like budgets produced in the Reagan era - when education and human services program eliminations, consolidations, and cuts were the norm - it was difficult to follow the proposals from the documents presented to the public. The Bush budget provides a summary of program increases and new initiatives, including "$3.7 billion for a new economic and community development program that consolidates 18 ineffective or duplicative programs into a flexible and targeted program." What is not said is that this new initiative cuts $1.8 billion from the consolidated programs, including the Community Development Block Grant. Long-Term Implications The president's budget puts this country on the wrong track. Using the president's assumptions and projections, the deficit will begin to get better as a percentage of the economy. But by 2013, the deficit falls off a proverbial cliff and things only get worse for as far as the eye can see. By 2070, the deficit would be 15 percent of the GDP, an unsustainable level. The deficit as a percentage of GDP is currently less than 4 percent, and it has stimulated national concern about its size. These long-term projections by the administration also do not include any of the above factors left out of the budget (e.g., Social Security reform, costs of continuing wars). Moreover, if productivity is lower than projected the steepness of the cliff is even greater. All in all, this is a clarion call for thinking beyond the immediate action of any one fiscal year. The tax cuts enacted since 2001 were ill-advised and must be rolled back. Otherwise the draconian cuts will create seismic disruption and disaster in our communities.