2009 Budget Proposed by President Bush


Familiar Themes Headlined by Its Best Feature—It’s the Last One

Earlier this month President Bush announced his blueprint for the federal budget for federal fiscal year 2009, which begins in October 2008. Its dominant themes are the familiar ones of the Bush administration: a growing deficit, a widening gap between the haves and have-nots, increased tax cuts disproportionately benefiting the wealthy, retreat from support for programs that create opportunity or otherwise help low- and middle-income people, and continued cost shifting onto state and local governments.

The Deficit
The Bush administration itself predicts that the budget proposal would balance the budget by 2013, but that prediction relies on the omission of large costs. For example, the budget assumes that in 2012 the relief from the alternative minimum tax (AMT) would expire—meaning that 38 million mostly middle-class households, rather than 4 million, would pay the tax that year. This is extremely unlikely. Bush’s budget also excludes any costs for the two wars or other global antiterror activities after 2012.

A more sober assessment, including a continuation of AMT relief and the most optimistic war spending estimates from the Congressional Budget Office, is that the Bush proposal would yield budget deficits of $118 billion in 2012 and $153 billion in 2013.

Tax Cuts
The heart of the deficit growth throughout the Bush years has been tax cuts, depriving the budget of revenues that would meet spending needs. In this budget proposal President Bush would continue all of the tax cuts of 2001 and 2003 and add new tax cuts on top. This over the next five years is $900 billion in tax cuts, which over the next ten years would grow to $2.4 trillion in tax cuts, not including the continuation of the AMT relief, which would add another $1.3 trillion over ten years.

The top 1 percent of households, which have income over $450,000 a year, would each receive about $1 trillion of this tax relief over ten years, or about $60,000 per year. The top 0.3 percent of households, with income over $1 million a year, would each receive $150,000 in tax relief a year. Together this group would get an amount of tax relief more than the entire amount that the federal government spends on elementary and secondary education and health care for veterans.

The proposal also includes a permanent repeal of the estate tax. That would cost over $550 billion over ten years and would go to the wealthiest 1 percent to 2 percent of American families. The richest families in the country would get tens or even hundreds of millions in tax relief apiece.

Budget Cuts
The budget proposal would cut domestic programs by $23 billion in 2009 and would grow to a total of $474 billion over five years. The cuts hit nearly every area of the domestic budget. Spending would be below 2008 levels even before adjusting for inflation. Here are some specifics (but not a complete list):

  • The Low-Income Home Energy Assistance Program would be cut $570 million or 22 percent and would be back to the level in 2001, when energy prices were 65 percent lower. This means either reducing payments by almost a quarter or cutting off about one million low-income and elderly people.
  • Child care funding would be frozen for the seventh straight year. Inflation-adjusted losses in this spending line are 17 percent through 2007, a period during which the population of low-income children grew by 8 percent. The budget proposal itself estimates that 200,000 fewer children would be served in 2009.
  • Cuts in the Section 8 housing choice voucher program would mean that 100,000 fewer low-income households would receive help to afford housing.
  • The Centers for Disease Control and Prevention allocation would be cut by $453 million, including sharp cuts in programs to detect and control infectious diseases and preventive health services.
  • The Environmental Protection Agency would lose $330 million, to a level far below the 2001 level without adjusting for inflation.
  • The budget would fund some educational programs but cut others, so that the total for K-12 spending would not keep pace with inflation.
  • There are over $15 billion in cuts in discretionary grants for states and localities, or over $19 billion after inflation (11 percent). For example, grants for homeland security, firefighters, and first responders would be cut 45 percent ($1.5 billion) before inflation.
  • Cuts in Medicaid over five years amount to $18.2 billion. These do not reflect planned reductions in the cost of health care but essentially shift costs to the states.
  • Medicare would be cut by over $550 billion over ten years. Some of these cuts are recommended by Congress’ expert advisory panel (MedPAC), and these are considered safe. But the Bush administration would make additional cuts that would threaten the willingness of providers to continue participating. And the Bush administration does not propose to make the recommended cuts in overpayments to health maintenance organizations under Medicare. The proposal would protect and continue those overpayments.
  • While that proposal includes an increase for the State Children’s Health Insurance Program of $19.7 billion over five years, this is less than the $21.5 billion needed just to continue the current level of the program.

President Bush’s proposal will now be taken up by Congress, which will attempt to pass a comprehensive budget resolution this spring. The budget resolution then governs the actual appropriations bills that Congress will attempt to pass prior to the end of the current fiscal year on September 30.

Source for this article: Robert Greenstein et al., “The Dubious Priorities of the President’s FY 2009 Budget,” Center on Budget and Policy Priorities (Feb. 7, 2009). That article and a number of others about the budget can be found at http://www.cbpp.org.  For more information, contact John Bouman at johnbouman@povertylaw.org or Melissa Cubria at melissacubria@povertylaw.org.