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Summary and Analysis of the
President's 2005 Budget

Overview

This is the last Administration budget in this presidential term. It is, in that sense, a summing up; and to sum up an Administration's budgets is to measure its stewardship.

When it took office, this Administration enjoyed two advantages that no other in modern memory has had:

  • First, it inherited a budget surplus — the first budget surplus in almost three decades, and the first budget surplus ever to rely for not one dime on either the Social Security or the Medicare Trust Fund surplus.

  • And second, this Administration inherited the longest economic expansion in the nation's history, including the strongest business investment boom in the nation's history.

How has this Administration cared for the legacy that it received? It has taken the budget right back into the deficit ditch where the first President Bush left it in 1992.

  • Budget Still Deteriorating — The budget has worsened in every year of the Bush Administration. The $5.6 trillion cumulative surplus over fiscal years 2002-2011, projected three years ago, is now totally gone. The Administration now refuses to provide projections for the customary ten-year budget window, apparently because its budget will never improve under its own policies and assumptions. The Administration now admits to a five-year cumulative budget deficit of $1.3 trillion, but it will not reveal ten-year estimates; the House Budget Committee Democratic staff now estimate the budget outcome for fiscal years 2005-2014 as a deficit of $4.0 trillion.

 

Projected 2004 Surplus Becomes
Largest Deficit in History

 
Unified
On-Budget
February 2001
268
57
August 2001
217
6
February 2002
-14
-208
July 2002
-48
-236
February 2003
-307
-482
July 2003
-475
-639
February 2004
-521
-675



  • Administration Track Record Discouraging — The President lets the deficit increase by almost 50 percent this year, and then makes the lame promise that he will cut it in half within five years. It is hard to take his claim seriously. This promise comes from an Administration that has enlarged the deficit by $648 billion since 2001, and has added $1.7 trillion in gross debt in just three years. For 2004, the budget proposes a record deficit of $521 billion — $146 billion more than the 2003 deficit, which was itself an historic high.

  • Deficit Is About Values — These huge deficits are not just an accounting problem. They are a moral problem, because our children and grandchildren will be forced to repay the record amounts of debt we are borrowing today. The Administration has dismissed these deficits as "manageable," but large chronic deficits threaten our economic strength by crowding out private investment, driving up interest rates, and slowing economic growth.

  • Administration Has No Plan — Despite Administration claims of fiscal responsibility, this budget makes clear that the President simply has no plan to eliminate the budget deficits we now face. In fact, the Administration builds its budget around yet another set of tax cuts, reducing revenues by more than $1 trillion and driving the budget further into the red.

 

Budget Totals
(Dollar Amounts in Billions)

 
2003
2004
2005
2006
2007
2008
2009
2005-09
Receipts
1,782
1,798
2,036
2,206
2,351
2,485
2,616
N.A.
Outlays
2,158
2,319
2,400
2,473
2,592
2,724
2,853
N.A.
Deficit
(375)
(521)
(364)
(268)
(241)
(239)
(237)
1,349

Percents of GDP

 
2003
2004
2005
2006
2007
2008
2009
2005-09
Receipts
16.5%
15.7%
16.9%
17.4%
17.7%
17.8%
17.8%
N.A.
Outlays
19.9%
20.2%
19.9%
19.6%
19.5%
19.5%
19.4%
N.A.
Deficit
-3.5%
-4.5%
-3.0%
-2.1%
-1.8%
-1.7%
-1.6%
N.A.

Source: Office of Management & Budget, Fiscal Year 2005 Budget of the United States Government



  • Budget Omits Key Future Costs and Vital Information — The budget is neither credible nor realistic. It hides the deficits and the tax cuts' true impact by failing to provide any deficit figures at all after 2009 — raising the question of how any Administration that has no confidence in budget projections beyond five years could propose large permanent tax and spending programs. And even the dire figures provided in the first five years of the budget are optimistic, because the budget also omits many costly parts of the President's avowed program. Had the full costs of Administration initiatives like military operations in Iraq and Afghanistan, Social Security privatization, and manned space travel to Mars been included, these record deficits in the Bush budget would be even worse — and the budget would have no chance of cutting the deficit in half in five years, as the President has promised.

 

Unified Budget Deficit Under The President's Program
House Budget Committee Democratic Staff Estimate
Billions of Dollars

2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2005-14
-521
-389
-324
-334
-355
-374
-397
-447
-439
-478
-502
-4,040


  • Budget Ignores America's Needs — The budget's priorities are ill-chosen. While proposing huge new tax cuts with one hand, the Administration squeezes funding for the nation's priorities with the other. The Administration asserts that it is increasing non-defense, non-homeland security domestic appropriations, albeit by less than one percent. But when international affairs funding is factored out, non-homeland security domestic appropriations are actually cut below the 2004 level. This overall cut makes only a small dent in the deficit — such domestic spending is only about 15 percent of the budget, and it has barely grown in the past three years — but it would reduce funding for transportation, environmental protection, small business, and other priority services that the American people need, want, and expect. If the budget can afford more than $1 trillion to extend tax cuts, sacrificing such less-costly but needed services is surely unwise. Even leading Congressional Republicans have said that cutting these spending priorities is unlikely.

 



One of the key priorities omitted from the budget is the continuation of extended unemployment insurance benefits. An estimated 375,000 jobless workers exhausted their state benefits in January - a record high - only to find no federal help available to them while they continue to look for work. That is because Republicans allowed the Temporary Extended Unemployment Compensation program (TEUC) to expire at the end of December, despite strong urging from Democrats to continue the program. TEUC provides 13 weeks of federally funded extended benefits to jobless workers who exhaust their regular state unemployment benefits. The economy has lost 2.2 million jobs since President Bush took office, but despite the clear shortage of jobs, the budget only creates a pilot project for "Personal Re-employment Accounts." The tens of thousands of workers who exhaust their benefits each week, who want to work but cannot find jobs in this economy, and who are hard pressed to pay the rent and feed their families, do not need an experiment; and the Republicans show only indifference to their hardship. By contrast, legislation sponsored by House Democrats guarantees all jobless workers at least 26 weeks of extended benefits and expands access to unemployment benefits for workers who are low-wage earners or who work part time.

Although the Administration asserts that this budget is fiscally responsible, the evidence clearly does not support such a claim. The Administration has no plan to repair the deficit. Instead, it just proposes still more tax cuts that dig the budget deficit hole deeper.

In this last budget of a Presidential term, the issue is stewardship. The previous Democratic Administration inherited a jobless recovery and the largest budget deficit in history, and left to its successor the largest budget surplus in history and the longest economic expansion in modern history. The Bush Administration immediately took the economy and budget right back into the ditch, on the very eve of the challenge of the retirement of the baby-boom generation. When the record is written, the Republican Congressional leadership and the Bush Administration will be known for the most colossal fiscal miscalculation in all of American history.