Increases, decreases, and deficits: The President's budget proposal.

• Author: Desimone, Daniel C.
• Position: Federal Focus - Brief Article

"Once we have funded our national security and our homeland security, the final great priority of my budget is economic security for the American people," President George W. Bush declared in his State of the Union address. "To achieve these great national objectives--to win the war, protect the homeland, and revitalize our economy--our budget will run a deficit that will be small and short-term, so long as Congress restrains spending and acts in a fiscally responsible manner." (1)

With these words, President Bush acknowledged a return to fiscal imbalance and launched the first salvo in the fiscal 2003 budget battle. (2) Six days later, the president submitted his $2.12 trillion budget proposal to Congress, projecting deficits through 2004 before a return to balance in 2005 (Exhibit 1). The president's plan calls for $600 billion in additional tax cuts over 10 years, deep cuts in highway funding and job training programs, and significant spending increases for homeland security and defense. Most of the president's requested spending increases, however, target programs other than domestic security and defense. The National Taxpayers Union estimates that slightly more than half of the approximately $106 billion in proposed new spending for next year is unrelated to homeland security or national defense. (3)

In addition to a 12 percent increase in Pentagon spending and $38 billion for homeland defense, President Bush's budget includes plans to extend unemployment benefits and health care coverage for workers who have lost their jobs; fund the recently enacted education reform bill; expand Head Start and other early childhood education programs; build infrastructure; underwrite technological research into energy conservation and new energy sources; add a prescription drug benefit to Medicare; increase spending for veterans' health benefits; bolster compensation for military personnel; double the size of the Peace Corps; and expand Amen Corps under a new program called USA Freedom Corps.

If the past is any guide, this is just the beginning. Members of Congress have their own laundry lists of programs to fund. Over the last five years, Congress has consistently increased annual discretionary spending by at least 5 percent. As such, Congress is unlikely to accept the White House's proposal to limit non-defense, non-security spending increases to just 2 percent. Indeed, many of the proposed spending reductions included in the president's 2003 budget were either rejected last year or were added to appropriations over the president's objections. Thus, projected deficits of $106 billion, $80 billion, and $14 billion over the next three years could balloon to 1980s proportions.

Priority Setting: A Synopsis of the Proposed Budget

The president's proposed budget represents the crystallization of the administration's priorities within the constraints of political and economic reality. The sections that follow highlight some of the most significant proposed increases and decreases in funding and the potential ramifications thereof on state and local governments.

Homeland Security. The most significant proposed spending increase affecting state...