Domestic, Foreign Agenda Run Counter to Fiscal Goals

When he discussed fiscal policy Wednesday night, President Bush portrayed himself as a champion of “spending discipline,” renewing his pledge to cut the federal deficit in half by 2009 and vowing to send Congress a budget that “substantially reduces or eliminates more than 150 government programs.”

In the rest of his annual report to Congress, however, the president laid out an agenda of domestic and foreign policy action that illustrated just how hard it would be for his administration to achieve its goals on the budget and fiscal policy -- as it has been for most of his predecessors.

“America’s prosperity requires restraining the spending appetite of the federal government,” Bush said. “The principle here is clear: A taxpayer dollar must be spent wisely, or not at all.”

But during his first four years in the White House, Bush presided over the greatest federal spending increase since the Reagan administration. In President Reagan’s first term, federal outlays rose 39%. In Bush’s first term, outlays rose 30% -- about 7% a year.

Isabel Sawhill, director of economic studies for the Brookings Institution, said she heard nothing new about reducing the government deficit, now at a record $427 billion.

“I was struck by his theme of wanting to leave a better world for our children, and ignoring that you can’t do that if you’re passing on all this debt,” she said.

Robert Bixby, executive director of the Concord Coalition, which works for a tight budget policy, said he found the speech “strong on fiscal discipline rhetoric, but the president’s really big initiatives -- continuing the war effort, making his tax cuts permanent and establishing private Social Security accounts -- all work in the other direction.”

Diverting some Social Security payroll taxes to private investment accounts would cost $754 billion in the next 10 years, an administration official estimated -- much more after that. And Bush promised not to cut benefits for anyone born before 1950, and he ruled out higher payroll taxes.

And last week, the president asked Congress for $80 billion for operations in Iraq and Afghanistan.

Not all the president’s spending initiatives carry such enormous price tags. In the Middle East, he said he would ask Congress for $350 million in new aid for the Palestinian Authority as it pursued peace talks with Israel. The money is to go for economic, political and security measures.

The budget cuts, Bush said, would come in domestic discretionary programs -- those whose spending levels are set in annual appropriations bills. He promised that his 2006 budget would hold spending growth in this category below inflation.

But the only programs Bush singled out were those he said his budget would treat generously -- including community health centers, the No Child Left Behind program, Pell grants for college students and research on hydrogen-fueled cars. The president did not identify any programs among the 150 that he has slated for cuts.

Particularly conservative members of Congress welcomed Bush’s tone.

“President Bush’s call for fiscal restraint should not be seen as a starting point for negotiations but a backstop for a Congress that has the capability of reducing spending, not merely slowing its rate of growth,” said Sen. Tom Coburn (R-Okla.).

But other congressional reaction suggests there will be tough sledding ahead as Bush’s budget goes through the legislative mill.

Rep. Michael N. Castle, a Delaware Republican, promptly went to bat for Amtrak, which he understood would be facing reduced government subsidies under the Bush budget. “I have a deep concern that President Bush does not understand the importance of Amtrak and passenger rail to the Northeast Corridor and other key regional networks like California,” Castle said.

Castle said he would be still more upset if “these proposed cuts are merely symbolic -- in that the president knows that Congress will fight to restore the funding, but he can claim that he is working to slash funding and reduce the deficit.”

Indeed, according to the House Appropriations Committee, Bush proposed in the budget he presented last year to eliminate 65 programs totaling $4.8 billion. Congress killed two or three, chopped two others by at least 75% and consolidated three programs into one.

And the category of programs that Bush vowed to restrain -- discretionary programs excluding defense and domestic security -- accounts for just one-fifth of government spending.

“You would barely eliminate the deficit by killing every program in the category,” Bixby said.

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Times staff writer Janet Hook contributed to this report.