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Bush's budget doesn't address long-term fiscal worries, experts say

WASHINGTON—President Bush's proposed budget takes a small step toward reining in long-term spending, but experts warn that his plan punts on the hard choices needed to end deficits and put America's future finances on stronger footing.

This year the deficit is $423 billion. Bush's plan would cut it to $354 billion in fiscal 2007 and to $205 billion in 2011.

Bush is committed to cutting the deficit in half by 2009, in its ratio to the economy, from a 2004 projected level of 4.5 percent. His budget would put the deficit at 2.6 percent of gross national product in fiscal 2007 and at 1.4 percent in 2009.

To get there, the budget seeks to cut $36 billion in spending over five years on Medicare, the government insurance program for the elderly. Medicare would still cost $2.14 trillion in that span. Bush also seeks to carve about $15 billion from spending on a wide variety of domestic programs, including the environment, energy research and transportation.

More than offsetting such savings, he would make permanent the tax cuts enacted in 2001 and 2003. Those and other new tax breaks would deny the Treasury some $1.7 trillion over 10 years.

Experts question some budget assumptions.

For instance, the budget says nothing about future spending for the wars in Iraq and Afghanistan beyond fiscal 2007. Also, there are no cost projections—beyond $20 billion for fiscal 2007—for providing relief from the Alternative Minimum Tax, which is snaring ever more middle-class taxpayers. Finally, the budget estimates that military and homeland security spending will be flat or reduced from 2008 to 2011.

"It just seems unrealistic that we're going to fight a global war on terrorism, which the Pentagon says is a long war, beef up homeland security ... and at the same time cut revenues. It doesn't add up to sustainable," said Robert L. Bixby, the executive director of The Concord Coalition, a bipartisan group that favors balanced budgets.

Concord estimates that the unspecified war costs and AMT relief would add $500 billion to deficits over five years.

As it stands, the government already is spending $20 for every $17.50 it collects in taxes. Bush's tax cuts would widen that gap.

Last month, the nonpartisan Congressional Budget Office projected a small budget surplus of $67 billion if the tax cuts expire by 2011. But making them permanent would produce annual deficits totaling $4.2 trillion by 2016, the CBO estimated.

"In a nutshell, this budget clearly digs the hole deeper," said Robert Greenstein, the executive director of the liberal Center on Budget and Policy Priorities.

Deficits will matter after 2011. That's when the first baby boomers turn 65. From that year forward, retired boomers will strain federal spending as the government tries to meet their health and pension benefits.

Social Security, Medicare and Medicaid costs threaten to overwhelm the federal budget.

"By 2035, when the remaining baby boomers will be in their 70s and 80s, these three programs could easily account for nearly two-thirds of non-interest federal spending," the administration acknowledged in one of its budget books, "Analytical Perspectives."

Some experts think Bush's budget fails to grapple seriously with the challenges just ahead.

"Some of these things tend to be diversion, or political theater, where you make a big show on spending restraint on a very small part of the budget and it covers up the fact that most of the budget is on autopilot and growing on an unsustainable rate," said Bixby of the Concord Coalition.

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(c) 2006, Knight Ridder/Tribune Information Services.

PHOTOS (from KRT Photo Service, 202-383-6099): BUDGET

GRAPHIC (from KRT Graphics, 202-383-6064): 20060206 USBUDGET deficit

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