Ten Things You Should Know About President Bush’s Budget

The Bush administration’s 2005 budget presents a misleading picture of our nation’s finances and includes a number of manipulative tactics to hide the true costs and consequences of the administration’s fiscal priorities.

1. Provides a deceptive five-year budget outlook: The administration’s single largest policy choice in the 2005 budget is to extend their tax cuts into the next decade. Yet their choice of a five-year budget window, conveniently stopping at 2009 – the year before the major tax cuts expire and the year the baby boomers begin retiring – presents an unfair picture of our fiscal situation. The tax cuts will cost $4.6 trillion including increased interest costs if extended over the next decade, over $400 billion in increased costs in 2014 alone.
2. Denies tax cuts are the true cause of the deficit: The president’s budget takes aim at non-security discretionary spending programs, while ignoring the impact of massive tax cuts on future fiscal deterioration. Overall funding for discretionary programs increased from 6.8 percent of GDP in 2001, before September 11 reshaped our priorities, to 8.1 percent of GDP in 2004. This is almost entirely attributable to increases in our defense, international, and homeland security budgets, which rose from 3.4 percent of GDP in 2001 to 4.7 percent in 2004. Outside these areas, non-security discretionary spending has been essentially flat, with funding only rising from 3.3 percent of GDP in 2001 to 3.4 percent in 2004. As a recent American Progress analysis found, the contribution of the tax cuts to the swing from projected surpluses to deficits in 2004 is 11 times as large as non-security discretionary spending, and the contribution to projected deficits in 2014 is 18 times as large.
3. Devastates domestic priorities: The budget proposes real cuts in overall non-security discretionary spending for major domestic priorities.
   • Underfunds the “No Child Left Behind” education program by $9.4 billion – 27 percent less than authorized by Congress.
   • Cuts veterans funding by $13.5 billion over next five years.
   • Takes away childcare benefits from 350,000 low- and moderate-income American families by 2009.
   • Eliminates funding for 38 existing education programs including after-school care and teacher quality initiatives.
   • Slashes funding for the Community Oriented Policing (COPS) program by 94 percent, which could end up taking 88,000 officers off the street.
   • Cuts the Federal Aviation Administration budget at a time of increased air traffic volume and heightened terrorism concerns.
   • Takes away 7.3 percent of the Environmental Protection Agency budget – the second largest percentage cut for any department.
   • Freezes Pell Grant awards and proposes further cuts or freezes in college tuition and aid sources.
   • Cuts federal assistance to state and local law enforcement by $1 billion.
   • Reduces and reorganizes funding for programs to reduce violent crime, drug activity, and gang activity in high-crime neighborhoods by 30 percent, down to $52 million from $72 million in 2004.
   • Fails to provide the U.S. Post Office with $779 million for bio-detection technology necessary to protect post offices from anthrax-like attacks.
4. Pushes health proposals for the healthy and wealthy at the expense of the uninsured: The president’s health plan includes $41 billion for Health Savings Accounts that primarily benefit the healthy and wealthy. These HSA’s, together with other budget proposals to create Association Health Plans and tax credits for individual health insurance, would likely result in typical Americans paying more for less health coverage. More than 40 million children and poor adults who rely on the Children’s Health Insurance Program and Medicaid would also face severe cutbacks due to the president’s continued push for block grants and the failure to reauthorize much-needed funding. Meanwhile, the administration estimates that the private health insurance industry will reap an extra $46 billion from the Medicare law pushed through Congress last year.
5. Selectively applies "fiscally responsible" budget rules: The budget brings back pay-as-you-go rules, but enforces them only on entitlements and refundable tax cuts for moderate-income Americans, while completely ignoring these rules for tax cuts – the overwhelming driver of our deteriorating fiscal situation. As Federal Reserve Chairman Alan Greenspan has noted, it is important to "look at both sides," not only on spending entitlements but "tax entitlements" as well.
6. Fails to come clean on Alternative Minimum Tax (AMT): By only including a one-year fix of the AMT in the budget, the administration will either have to withhold their full promised tax cuts from over 20 million people in 2006 and as many as 44 million by 2014, or they will have to increase their revenue projections significantly. The Congressional Budget Office, assuming a moderate fix of the AMT, estimated the 10-year cost at $549 billion.
7. Promotes deficit-producing savings gimmicks: The Bush administration’s budget proposes the creation of so-called Retirement Savings Accounts (RSAs) and Lifetime Savings Accounts (LSAs). Under the president’s proposals, $5,000 can be contributed to these accounts each year – after tax – with investment earnings and withdrawals tax free. These accounts will appear as a benefit for the budget for the next five years as high income earners are expected to switch from their current IRAs and other tax advantaged savings vehicles to these newly created accounts. However, the long term effect of these proposals would blow a hole in our deficits as beneficiaries withdraw their monies tax free.
8. Fails to adequately protect states and cities from terrorist threats: The administration has proposed a 10 percent increase in the resources available for homeland security. However, the budget also calls for an $800 million decrease in funding for the Office of Domestic Preparedness, the office responsible for distributing antiterrorism funds to states and localities. According to the U.S. Conference of Mayors, "By the end of December 2003, 76 percent of the survey cities had not received this first responder/critical infrastructure funding through their states."
9. Provides nothing for military operations and reconstruction in Iraq or Afghanistan next year: The administration acknowledges that our troops will be in these countries beyond 2005, yet provides no funding in its current budget for these on-going wars. In order to defend their claim to cut the budget in half within five years, the administration conveniently left out nearly $50 billion in estimated expenditures for Iraq and Afghanistan.
10. Shortchanges critical overseas programs and ignores key regions: The president’s budget fails to address future instability and insecurity caused by the lack of basic education, family planning, maternal and child health, and environmental degradation across the globe. The president promised $15 billion to fight AIDS over three years, yet the current budget only provides $2.8 billion in funding. Front-line states in the "War on Terrorism" are favored over other important regions, particularly Latin America, which suffers from the largest cuts to development and health programs of any region. Despite the photo-ops with Latin American leaders apparently aimed at courting the Hispanic vote, the president has failed to deliver any meaningful resources for the people of Latin America.

Budget analysis and facts provided by the Center for American Progress and other groups. Click here for a full list of contributors with links to their budget pages.