Federal budget a mixed bag for state and local government: The presidents fiscal 2004 budget reduces or even cuts funding for many state and local government programs traditionally funded by the federal government.

• Author: DeSimone, Daniel C.
• Position: Federal Focus

A president's budget is not only a ledger of federal revenues and expenditures, but also a document of purpose--of political as well as fiscal design. Together with the State of the Union address, the president's budget proposal inaugurates each new session of Congress, outlines the administration's policy priorities, and heralds forthcoming policy debates. A budget proposal normally sails choppy seas toward enactment. President Bush's fiscal 2004 budget: however, will have to navigate through a perfect storm to win passage. This storm includes a looming war with Iraq, new threats of terrorism, a skittish domestic economy, a stagnant worldwide economy, insecure financial markets, and rising deficits.

DEFICIT REDUX

"A recession and a war we did not choose have led to the return of deficits," President Bush acknowledged in submitting his five-volume, 13.5-pound fiscal year 2004 budget proposal to Congress February 3. "Compared with the overall federal budget and the $10.5 trillion national economy, our budget gap is small by historical standards. (2)" This statement marked a substantial reversal from President Bush's 2003 State of the Union address in which he declared that deficits would be small and short-lived. (3)

The $2.24 trillion budget blueprint, which forecasts a record $307 billion deficit, marks a striking fiscal turnaround since President Bush took office in January 2001. (4) The president inherited surpluses projected far into the future. Two years later, a recession, a plunge in the stock market, tax cuts, and a war on terrorism have washed away hundreds of billions of dollars in expected revenues. As a result, the fiscal 2004 budget projects deficits totaling $1.08 trillion over the next five years.

As he did in his fiscal 2003 budget proposal, the president proposed a fiscal 2004 discretionary budget that significantly increases defense and homeland security funding but constricts most other programs. While the president's budget would boost overall discretionary spending by 4 percent, many domestic programs would receive a 2 percent increase, at best, when defense and homeland security spending are factored in. (5) The plan calls for a $15.3 billion increase in defense programs and an 8 percent increase in homeland security spending.

The often tepid reactions to the president's plan from lawmakers on both sides of the aisle suggest that in many ways this budget will indeed sail chaotic seas as it navigates the political process. The proposed budget will likely require substantial...