Bush sends $2.9 trillion budget to Congress

updated 4:17 p.m. ET Feb. 5, 2007

WASHINGTON - President Bush sent a $2.9 trillion spending plan to a Democratic-controlled Congress on Monday, proposing a big increase in military spending, including billions more to fight the war in Iraq, while squeezing the rest of government to meet his goal of eliminating the deficit in five years.

Bush's spending plan would make his first-term tax cuts permanent, at a cost of $1.6 trillion over 10 years. He is seeking $78 billion in savings in the government's big health care programs — Medicare and Medicaid — over the next five years.

Responding to the new political realities of a Democratic-controlled Congress, Bush proposes balancing the budget in five years, matching a goal put forward by Democratic leaders. But Bush would achieve that feat while protecting his cherished first-term tax cuts.

Release of the budget in four massive volumes kicks off months of debate in which Democrats, now in control of both the House and Senate for the first time in Bush's presidency, made clear that they have significantly different views on spending and taxes.

"The president's budget is filled with debt and deception, disconnected from reality and continues to move America in the wrong direction," said Senate Budget Committee Chairman Kent Conrad, D-N.D.

The arrival of the massive four-volume set of green budget books, which will cover the budget year that begins next Oct. 1, will be followed by months of debate in Congress. Democrats charged that Bush wants to make painful cuts across a wide swath of government programs while protecting tax cuts that will make the deficit worse after 2012.

“This budget is plunging us toward a cliff that will take us right into a chasm of debt,” Conrad said in an interview Sunday.

NBC VIDEO Bush to ask for military spending money Feb. 5: The president unveils a budget plan today that includes a request for $245 billion for the wars in Iraq and Afghanistan over the next two years. NBC's Kelly O'Donnell reports. Today show

“In real terms, Bush’s plan is going to have very substantial cuts by the fifth year of this budget in all of the domestic priorities from education and health care to law enforcement and veterans,” Conrad said. “With Democrats in control, we will have different priorities.”

“It just gives you sticker shock. Every time you turn around it’s another $100 billion,” Conrad said of Bush’s war spending.

All-time federal deficit
The federal deficit hit an all-time high under Bush of $413 billion in 2004. It has been declining since that time and the 2008 budget projects it will continue to decline and show a surplus in 2012, three years after Bush leaves office.

To accomplish those reductions, Bush would allow only modest growth in the government programs outside of defense and homeland security. He is proposing eliminations or sharp reductions in 141 government programs, for a savings over five years of $12 billion, although Congress has rejected many of the same proposals over the past two years.

Bush also will seek to trim spending on farm subsidies by $18 billion over five years, mainly by reducing payments to wealthier farmers, an effort certain to spark resistance among farm state lawmakers.

Bush’s budget would achieve nearly $100 billion in savings over five years by trimming increases in Medicare, the health insurance program for 43 million retirees and disabled, and Medicaid which provides health care to the poor.

Trims proposed in Medicare spending
The restraints in Medicare spending would total $66 billion over five years while the savings in Medicaid would total $12.7 billion. Most of the Medicare savings would come in slowing the growth of payments to hospitals and other health care providers. But $11.5 billion in savings would come from boosting insurance premiums paid by the wealthiest Medicare recipients, those making more than $80,000 annually for individuals and $160,000 for married couples.

More people would be forced to pay the higher monthly premiums because the administration would stop indexing the income levels for inflation. Bush also wants to make high-income Medicare recipients pay more for their drug coverage as well as the higher premium they are now paying on the insurance for doctors’ visits.

These proposals are certain to generate stiff opposition in Congress, which refused to go along with smaller Medicare reductions Bush proposed last year. The administration argues that it is seeking to slow the average annual increases in Medicare over the next 10 years to 6.7 percent instead of current projections of 7.4 percent.

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