Bush's budget woes.

• Author: Shepler, Bob
• Position: WashingtonInsights

On February 2, President Bush submitted his $2.4 trillion budget for fiscal year 2005 to Congress, calling for members to hold the line on spending. Though calling for fiscal responsibility, the president's budget will increase the size of the federal budget deficit to $521 billion in the current fiscal year. If Congress follows the plan laid out by the president, it must cut many popular spending programs and limit overall increases in discretionary spending to less than 1 percent. The budget does not include additional dollars, up to an additional $50 billion, which the president will request from Congress later in the year to fund military operations in Iraq and Afghanistan.

While budget chief Joshua Bolton defends the president's plan--which he says over the next five years will cut the deficit roughly in half--Congressional Democrats have criticized the president harshly for fiscal irresponsibility. Customarily, the president submits a budget that projects deficits for 10 years, but President Bush's budget only looks five years into the future. This is because most of the tax cuts passed in 2001 begin to weigh heavily on budget forecasts beginning in 2010.

The president is gambling big that revenues to the federal Treasury will ultimately increase as individuals realize more income derived from previous tax cuts. In that vein, the budget calls for Congress to make permanent earlier cuts to personal income taxes that expire in 2011, at a cost of close to $990 billion over the next 10 years.

Some Congressional Republicans--who have in the past supported the president's spending priorities--have already begun to question the president's judgment in this important election year. Many state budgets have been severely impacted by the not-too-distant downturn in the economy and rely on important federal spending to balance their budgets. However, the president's budget allows for cuts in federal highway and transit spending which, in turn, is forcing affected states--which, unlike the federal government, often have balanced budget requirements--to turn to alternative sources of revenue.

Several state legislatures are considering, or have already considered, measures that would raise taxes on businesses, "sin taxes" and gasoline, and Maryland is considering the introduction of slot machines at racetracks as a way to avoid raising taxes elsewhere.

In turn, individuals will see less and less of the increase in their paychecks from...