Memo to the Community

To: Interested Parties
From: The Center for American Progress
UPDATED: February 8, 2005

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The federal budget is the most tangible expression of our nation's priorities. Unfortunately, this year's budget, as expected, focused on the wrong priorities and made the wrong choices for America. With budget deficits soaring to an estimated $448 billion, the president calling for the permanent extension of his tax cuts, and the administration planning to potentially add $2 trillion in new debt to privatize Social Security, threats to progressive priorities are very real. Below are the "Top Ten" issue areas to keep your eye on as the budget debate unfolds.

1. Keeping America Safe
   Everyone agrees that defense spending is a priority, but the administration will likely choose the wrong priorities within the defense and national security budgets. The president will probably attempt to fund the F-22 for years instead of halting its production immediately; deploy a missile defense program; and create a new generation of "bunker-buster" nuclear bombs. Focusing on these "gee-whiz" projects instead of on securing nuclear materials around the world, protecting the homeland, and saving the all-volunteer Army will make Americans much less safe in the long run. Will the budget make the right choices to keep us safe?
   
   The president did not end funding for the F-22 or V-22 Osprey. He requested $8.8 billion for missile defense, which continues to receive more funding than any other weapons program. He did not ask for an increase in the size of the Army, Army Reserves, Army National Guard or Reserves. This budget represents an inefficient use of our defense and national security resources.

2. Medicaid Maneuvers
   There is bipartisan concern in the states that the president's budget is going to stick them with more Medicaid costs. Medicaid, the nation's largest insurance program, is now a bigger component of total state spending than elementary and secondary education combined. Cash-strapped states cannot absorb additional demand without support from the federal government. Will the budget uphold federal commitments to the states and to the millions of children, low-income parents, and seniors who rely on Medicaid?
   
   The president's budget would cut Medicaid by up to $60 billion over ten years, which would shift enormous costs onto the states. According to Families USA, in the fifth year of the proposal alone the cuts are equivalent to providing health coverage for over 345,000 seniors or 1.8 million children.

3. Leaving College Students Behind
   With the cost of postsecondary tuition outpacing inflation, federal Pell Grants are critical for low-income college students. But increases in Pell Grants have not kept pace with the cost of college. The maximum award has been frozen at $4,050 since 2003, and the president's most recent proposal would increase that amount by only $100 this year—failing miserably to keep pace with last year's average $824 increase in costs at public four-year universities. How many students will the president choose to leave behind?
   
   The budget reduces the discretionary spending authority for the Department of Education by 1 percent. The president also proposed eliminating federal funding for 48 education programs. Although the budget enhanced Pell Grants, it also simultaneously cut other college financial aid programs, making college less affordable for low and moderate-income students.

4. Sticking it to State and Local Governments
   During the 1980s, large deficits led the federal government to shift costs onto state and local governments. The same thing is starting to happen again today. From Medicaid to education, infrastructure to law enforcement, the administration is putting costs onto the backs of states and cities. Will the budget impose additional requirements or create block grants that will be slashed in future years?
   
   Under the president's budget, grants to state and local governments for programs other than Medicaid would decline 4.5 percent from last year (after adjusting for inflation). According to the Center on Budget and Policy Priorities, grants for these programs would be lower in 2006 as a percentage of the economy than they were in 2001.

5. Slashing Science
   On November 20, 2004, Congress passed an omnibus appropriations bill that imposed budget reductions on almost all non-defense science agencies except for NASA. The National Science Foundation, for example, saw its budget decline by $107 million. At a time when it is in our economic interests to fully fund basic science as well as research and development opportunities, the Bush administration may continue to embrace these types of cuts. Will the budget contain additional cuts to the very investments that keep America strong?
   
   Although the president's budget increased funding for the National Science Foundation (NSF), even if fully funded the NSF budget would barely recover from FY2005 cuts and essentially return to FY2004 levels. The president also proposed deep budget cuts in other agencies: under the budget, the National Ocean Service budget would be cut $360 million from last year and the Office of Oceanic and Atmospheric Research would receive a $45 million cut.

6. Fuzzy Math, Suspicious Accounting
   Will the cost of the president's Social Security scheme be included in the budget? Will the budget include an honest accounting for spending in Iraq, Afghanistan, and homeland security? Acting as if such costs don't exist is disingenuous and makes it difficult for the American public to understand what kind of fiscal shape their government is truly in. Will this be an honest budget, or will Enron-style accounting rule the day?
   
   The budget did not include the potential cost of privatizing Social Security (which the administration estimates would be in the "trillions") or the full cost of the ongoing military operations in Iraq and Afghanistan.

7. Defending the Homeland
   The administration has created a false division between homeland security and national security—a division it is likely to exacerbate in the budget. The federal government should take the lead in partnering with the private sector to address homeland security concerns, particularly in the areas of port security, air cargo, and chemical facilities. Yet currently, the White House is spending six times more on ballistic missile defense than port protection, even though a nuclear weapon is much more likely to enter the United States via a shipping container than on the end of a missile. Will the administration continue to fund such programs at the expense of addressing real homeland security concerns?
   
   The funding requested for the Department of Homeland Security rose modestly from $28.9 billion to $29.3 billion—a one percent increase. Funding for Border and Transportation Security and the Coast Guard increased, but the administration cut funding for intelligence, infrastructure protection and grants to cities and states.

8. Gutting Environmental Protection
   Over the years, the EPA has been one of the Bush administration's favorite targets for budget cuts. What the president can't do through legislation, he may try to do by limiting the agency's ability to enforce existing laws. To this end, watch to see if he proposes slashing the personnel budget at the EPA, hampering the enforcement of environmental standards. Also keep an eye on the Department of Interior and Department of Energy budgets: funding for national parks and renewable energy research may be on the chopping block. Will the budget attempt to overrule popular support for the environment?
   
   The budget cut total funding for natural resources and the environment by 11 percent. It cut the EPA budget by 6 percent, cut clean water funding by $700 million, and included a backdoor provision for drilling in the Artic National Wildlife Refuge.

9. Funding Foreign Assistance
   The foreign assistance component of the budget is critical this year in light of the increased assistance pledged in response to the tsunami in Asia. Funding for our relief efforts is currently being drawn from existing accounts, reprogrammed from this year's budget and taken from other foreign aid accounts. It remains to be seen how—or whether—the administration will deal with these accounts in the budget. For example, how much will it request to fund relief efforts in Sudan, eastern Congo, Uganda, Bangladesh and other "orphan disasters"? Will money for tsunami relief cause other priorities to be short-changed?
   
   The increases in the foreign assistance budget—particularly with respect to the Millennium Challenge Account and Global HIV/AIDS Initiative—are positive steps forward. However, these increases were accompanied by proposed cuts to Development Assistance and Child Survival and Health Programs Fund, which would mean less aid for the poorest countries and weak and failing states.

10. Budget Process: Making the Rules up as We Go
    In 1990, Congress agreed to bipartisan pay-as-you-go rules for the budget process. These rules required that the costs of both entitlement expansions and tax cuts be offset fully, guarding equally against deficit-increasing actions on both sides of the federal budget ledger. Recently proposed pay-as-you-go rules were unbalanced and would have imposed no constraints on new tax cuts. Adopting them would make it much easier to cut funding to critical programs while allowing the Bush tax changes to remain in place. What other "Trojan horses" will be included under the guise of "process" that actually would implement real cuts for vital domestic and international priorities?
    
    This year's budget rule proposals are very similar to last year's: unbalanced PayGo rules and a variety of other gimmicks designed to cut essential domestic and international priorities, making it easier to enact more tax cuts that benefit the wealthy.

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