How Bush's Budget Goes Wrong

Leave Medicaid alone. Focus on Medicare drug benefits

There's good, bad, and just plain ugly in President Bush's $2.57 trillion federal budget proposal. The spending restraint is welcome, but the fiscal sleight of hand is not. The goal of cutting the deficit by the end of his term is laudable, but the legacy of soaring debt for Presidents to follow is not. Many programs targeted for cuts deserve them, yet many others do not. The President's proposal is a negotiating document presented to Congress. There's plenty of time to fashion a better budget. Here's how:

-- Cut deeper. The President's proposed $8.2 billion in cuts over 10 years for farm programs is way too low. In his first term, Bush showered agri-corporations with money. Ending subsidies to big cotton and rice farmers, in particular, would boost imports of the crops from Pakistan, Egypt, and other parts of the Middle East, raising incomes overseas and discouraging terrorism. The President wants to take $60 billion out of Medicaid. Rather than cut health care for the poor, he should reform the new Medicare drug benefit, which has unfunded liabilities three times that of Social Security. The 10-year price tag of the drug benefit has nearly doubled to $724 billion and the President still threatens to veto any changes. At the least, Medicare should be permitted to bargain directly with major drug companies, as the Veterans Affairs Dept. already does. That could save billions.

-- Cut differently. The budget proposal calls for ending the $1.2 billion annual subsidy for Amtrak, the national passenger rail service. Yet it hikes highway spending enormously, to $284 billion over six years, from the current $218 billion. Cutting the largest pork-barrel program in Washington would curb the deficit and still allow for support for public transportation. And paring multibillion-dollar spy satellite programs could free up more money for on-the-ground intelligence-gathering and preserve federal money for 100,000 police officers.

-- Cut honestly. The President's budget does not include new spending for the Iraq occupation, borrowing for the proposed Social Security private accounts, or ending the alternative minimum tax. Iraq will cost $82 billion in the next fiscal year alone. Private accounts will cost $1 trillion to $2 trillion over the next 10 years and $2 trillion to $3 trillion in the next decade. The number of taxpayers hit with the AMT will increase fivefold in 2006, with the tax falling on families with annual incomes of $100,000 to $500,000. Ending the AMT will cost upwards of $1 trillion over 10 years.

-- Cut less. The deficit morass is due as much to a revenue shortfall as excessive spending. Keeping taxes low on capital gains and dividends fosters investment and economic growth. Lowering income tax rates provides greater incentives to work. But cutting all taxes on estates of the very, very rich does neither. An estate tax that protects families, small farmers, and businesses can still generate tens of billions of dollars in revenues. Letting lapse the income tax cut of the highest income bracket could also generate billions of dollars of tax revenue that could pay for the teachers and emergency first-responders who will lose their jobs under budget proposals to reduce federal aid to cities. The budget also calls for cuts in Food & Drug Administration inspections of imported food and medicine -- right after a British plant supplying half the flu vaccine to the U.S. was closed due to contamination.

President Bush didn't veto a single spending bill in his first term. Indeed, he promoted some of the most expensive legislation in the nation's history even as he was sharply reducing the means to finance it. If he is now serious about fiscal restraint, he and Congress must show it.

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