Bush Budget Offers Hope -- and Headaches -- for Taxpayers, Research Group's Analysis Shows

(Alexandria, VA) -- The record revenues and sensible spending restraint for some federal programs proposed in the Bush Administration's 2008 budget may continue to shrink the deficit, but untamed entitlements and an uncooperative Congress could thwart any real progress toward fiscal responsibility. That's the perspective of the National Taxpayers Union Foundation (NTUF), which provided an analysis of the Bush budget just hours after its release today.

"President Bush has shown one way out of the red-ink swamp in which Washington has been mired," said NTUF Senior Policy Analyst Demian Brady. "Unfortunately, past history shows that Congress and the Administration have been reluctant to take this path." Among Brady's findings:

  • The White House proposes $96 billion in net savings between FY 2008 and FY 2012 from mandatory programs. This represents just 1.1 percent of the $8.6 trillion to be spent on mandatory items during that same period. Both Social Security and Medicare will grow by roughly 25 percent over those years, while Medicaid and State Child Health Insurance grants will rise by nearly 33 percent.
  • After rising in 2008, discretionary outlays are projected to decline by $75 billion over the four years that follow. This is an admirable but difficult task, since current-dollar discretionary spending has fallen just once during the past 37 years.
  • The budget's predicted surplus by 2012 will largely be a product of taxpayers delivering more revenues to Washington. For every dollar of deficit reduction between 2008 and 2012, spending restraint contributes approximately 20 cents while higher tax collections contribute 80 cents.
  • Historically, assumptions about future outlays often prove to be too low, even in the near-term. The FY 2008 amount is now $88 billion higher than what was forecasted in last year's budget. It took nearly 200 years before total federal spending topped $1 trillion (in 1987). In 2002, 15 years later, spending exceeded $2 trillion. The $3 trillion line is expected to be crossed in the year 2010, but could actually occur much sooner if previous patterns hold true.
  • In past budgets the President has largely exempted the Departments of Defense and Homeland Security from budget reductions. This year, however, Bush has proposed an 8.9 percent decline in Defense's outlays between FY 2008 and FY 2012, while Homeland Security's funding would drop by 10.5 percent. Other large declines would be in store for the Departments of Housing and Urban Development (17.7 percent) and the Interior (32.4 percent), as well as the Executive Office of the President (25.9 percent).
  • Major outlay hikes would be provided for the Departments of Labor (10.5 percent) and the Treasury (12.9 percent), while the National Science Foundation would see a 23.6 percent boost.

Brady noted that while the budget calls for earmark reform, a legislative line-item veto, and over 300 program reductions or terminations in 2008, this agenda won't be fulfilled without concerted efforts from the Legislative Branch. Earmarking will be disclosed but not eliminated, while the legislative line-item veto recently failed in the Senate. Furthermore, 70 federal programs measured by the Program Assessment Rating Tool that were zeroed out or cut in the FY 2008 budget were also targeted in the FY 2007 budget. This suggests that Congressional resistance overcomes many of the President's recommendations.

"In 2005 Congress nearly balked at passing a five-year, $40 billion deficit reduction bill," Brady concluded. "President Bush is now proposing roughly four times that amount in slower outlay growth, which in itself is a modest gesture. Taxpayers will soon see if bipartisan concern over deficit spending translates into bipartisan action."

NTUF is the non-partisan research and educational arm of the 350,000-member National Taxpayers Union. Note: For additional studies on fiscal policy, including a cost analysis of the President's State of the Union speech, visit www.ntu.org.