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Bush unveils record $4.2 trillion budget

Boost in military funding and cutbacks in health schemes mooted

WASHINGTON – THE United States’ first-ever budget to hit US$3 trillion (S$4.2 trillion) has been proposed by President George W. Bush.

It aims to boost military funding, virtually freeze many domestic programmes, and will result in huge fiscal deficits of around US$400 billion for this year and next.

Democrats, who control Congress, are pledging fierce opposition to the spending plan, Mr Bush’s last before he leaves office.

The 2009 budget, sent to Congress yesterday and due to begin on Oct1, would more than double the US$163 billion shortfall recorded last year.

It would approach the US$413 billion budget gap of 2004, which was a record in dollar terms, although the Bush administration emphasises that the deficits in the next few years would likely be around 2.8 per cent of gross domestic product – not far from the historical average.

With the economy possibly teetering on the brink of a recession, revenues are expected to suffer, reversing a trend of the past three years in which annual deficits declined.

A promised US$150 billion stimulus package of tax rebates – reflected in the budget – will add to the deficit, at least in the short term, and funding for the Iraq war is another source of red ink.

In terms of cuts, the Bush plan aims to rein in domestic spending, in areas from home heating-oil assistance to health care.

While many – if not most – of the priorities of the Bush budget will be jettisoned by the Democratic-led Congress, its unveiling will trigger a new round of sparring over Mr Bush’s fiscal policies and economic legacy.

‘Today’s budget bears all the hallmarks of the Bush legacy – it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services,’ said House Budget Committee chairman John Spratt, a South Carolina Democrat, yesterday.

‘Far from proposing a plan to fix the budget, the Bush administration proposes policies that worsen it.’

Last year, when Democrats were newly in the majority, there were drawn-out veto struggles. This year’s fights could be worse because it is an election year.

As in past years, Mr Bush’s biggest proposed increases are in national security. Defence spending is projected to rise by about 7per cent to US$515billion and homeland security money by almost 11per cent, with a big gain for border security.

The bulk of government programmes for which Congress sets annual spending levels would remain frozen at current levels.

The President does shower extra money on some favoured programmes in education and to bolster inspections of imported food.

His spending proposal would achieve sizeable savings by slowing growth in the major health programmes – Medicare for retirees and Medicaid for the poor. There, Mr Bush is asking for almost US$200billion in cuts over five years, about three times the savings he proposed last year.

Democrats say the plan is a continuation of failed policies that have seen the national debt explode under Mr Bush – projected surpluses of US$5.6 trillion wiped out; and huge deficits taking their place, reflecting weaker revenues from the 2001 recession.

The Democrats also blamed Mr Bush’s costly US$1.3 trillion tax cuts during his first term.

‘The Bush administration is going to hand the next president a fiscal meltdown,’ Senate Budget Committee chairman Kent Conrad told Reuters.

 

Source: ASSOCIATED PRESS, REUTERS (The Straits Times 5 Feb 08)

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