Political Economist

February 7, 2006

The Proposals - Domestic Spending Squeezed Throughout the Government

By ROBERT PEAR

WASHINGTON, Feb. 6 — President Bush's budget squeezes domestic spending throughout the government, cutting the growth of Medicare, reducing crop payments to farmers, eliminating a food program for low-income people and slashing support for vocational education.

Over all, Mr. Bush said he would cut a large general category of the budget known as domestic discretionary spending, which includes most government programs outside of the Pentagon, the Department of Homeland Security and large entitlement programs. Spending in this category would decline to $398 billion in 2007, from $400 billion this year, the White House said.

Under the president's budget, total federal spending would rise at the slowest rate in more than a decade, increasing 2.3 percent, to $2.77 trillion in 2007. But spending for the three biggest entitlement programs — Social Security, Medicare and Medicaid, which account for 40 cents of every dollar spent by the government — would shoot up 8 percent in 2007.

Mr. Bush proposed substantial increases in premiums paid by employers to the Pension Benefit Guaranty Corporation, which insures benefits provided under private pension plans to more than 40 million Americans. The Bush administration said the proposal would bring in $16.7 billion over five years.

The president proposed cutting all crop payments to farmers by 5 percent. This and other proposed changes in commodity programs would save $5 billion over five years, he said. Congress rejected similar ideas last year.

Mr. Bush urged Congress to eliminate the Commodity Supplemental Food Program, saying it "overlaps with" the food stamp program and the Special Supplemental Nutrition Program for Women, Infants and Children, known as WIC. Most of the beneficiaries are low-income people 60 and older. Some receive food stamps, but their food stamp allotments would not be increased to make up for the loss of commodities.

"In the long term," Mr. Bush said, "the biggest challenge to our nation's fiscal health comes from unsustainable growth in entitlement spending. We do not need to cut these programs, but we do need to slow their growth."

The Deficit Reduction Act, just passed by Congress, would save $39 billion over the next five years. On Monday, Mr. Bush proposed $65 billion of additional savings in entitlement programs.

Mr. Bush offered Congress advice on how to rein in spending. He would impose statutory limits on programs subject to annual appropriations, known as discretionary spending, from 2006 to 2011. Legislation that exceeds these limits would automatically force cuts in other domestic discretionary programs.

The president proposed a similar device to control spending on guaranteed benefit programs, known as entitlements. If Congress changed these programs in a way that increased the budget deficit, other benefit programs would automatically be cut to offset the cost.