Bush Budget May Be Squeezed in Middle

President Bush, preparing his election-year budget, is under intense pressure from conservatives to slow the vast expansion of government spending since taking office three years ago.

But to achieve even his own goal of cutting the deficit in half over five years, Bush will propose limits on popular programs like highway construction and energy subsidies -- programs that congressional Republicans may be loath to curb just as they are running for reelection.

Call it an orphan budget: Bush’s blueprint may be too fat for fiscal conservatives and too lean for lawmakers seeking to keep their jobs.

The White House is “nervous about the budget arriving on the Hill with a thump,” said G. William Hoagland, budget advisor to Senate Majority Leader Bill Frist (R-Tenn.). “It’s not something that will excite the troops.”

Still, it may serve an important political role as the blueprint for Bush’s own reelection platform. It will call for increased spending on defense, bolstering his stature as an aggressive wartime leader. It will propose education spending increases for the poor and disabled, reinforcing his claim to be a compassionate conservative. It will include his space exploration initiative, a John F. Kennedy-esque gesture to the future -- and an election-year boost to a space program that thrives in politically crucial Florida and Texas.

This budget for 2005, which Bush plans to send to Congress on Feb. 2, will find a political and economic climate far different from a year ago. Last January’s stubbornly sluggish economy has now picked up steam. The edgy anticipation of war with Iraq has been replaced by the more prosaic, divisive job of occupying the defeated nation. Bush’s stature, once enhanced by bipartisan support for his foreign policy, is peppered daily with attacks from nine Democratic presidential candidates.

Those changes will be reflected in the fact that Bush is not expected to include a big new tax cut to stimulate the economy, as he did last year. He is not expected to request more money for rebuilding Iraq -- the $19 billion provided for this year should last at least through 2005. And with his domestic policies under fire on the campaign trail, Bush is spotlighting proposed increases in popular programs -- while saying little about areas that will be squeezed.

Another big change since last year is that simmering discontent with Bush’s budget policy among conservatives has come to a rolling boil. They have complained loudly about the growth of spending during Bush’s presidency -- almost 24% in three years -- much of it for defense and homeland security.

The two straws that broke the conservative back came late last year, when Congress passed a 10-year, $400-billion expansion of Medicare and drafted a year-end spending bill that was packed with billions for special-interest projects.

Both Bush and Joshua Bolton, his budget director, have said the administration’s aim will be to halve the deficit, which is expected to near $500 billion in 2004, over the next five years. Much of that will come as a result of economic growth, officials have said, but Bush also plans to keep a lid on spending by capping annual appropriations growth at 3% or 4%, sources close to the administration say.

“That doesn’t sound very radical,” said Chris Edwards, a budget analyst at the libertarian Cato Institute, demanding tighter budget restraint. “I guess they’ve decided they can win the election without us.”

Administration officials held meetings last month to try to persuade conservative critics that Bush’s budget was not spendthrift. Bolton published a column defending Bush’s budget record in the editorial pages of the Wall Street Journal.

Bush’s biggest test may come not in his budget request but in how much he stands up to Congress to enforce his spending limits. He has yet to veto any legislation since becoming president, and some Republicans have suggested that he veto a bill this year to reestablish his bona fides as a fiscal conservative.

Bush and Congress are headed toward an early confrontation. One of the first bills to come before Congress this year will be a major highway bill -- an election-year bonanza for lawmakers up for reelection. GOP sources say Bush will propose $250 billion over six years for the highway bill -- a far cry from the $311 billion approved by a Senate committee and the $375 billion pending in the House. He also will reject congressional proposals to increase federal gasoline taxes to pay for new roads, bridges and tunnels.

Bush is expected to propose keeping funding flat for the Energy Department, with increases offset by cuts in such programs as energy research. But Congress is likely to be more generous -- if the largess in last year’s energy bill is any indication.

The National Institutes of Health, a biomedical research agency that saw its budget double in recent years, is expected to receive a modest increase of 2.5% or 3% under the president’s proposal. Anthony Mazzaschi, an official at the Assn. of American Medical Colleges, called the proposal “very disappointing.”

One measure of how hard it will be to cut popular programs in an election year is how quickly the administration backed down from a proposal to curb veterans’ benefits. After word leaked that the administration was considering an increase in military retirees’ share of prescription drug costs, veterans’ groups flooded the White House and Pentagon with protests. The plan has been dropped from this year’s budget.

Meanwhile, Bush has been tipping his hand on programs he wants to increase. He has pledged a $1-billion increase in funding for education of both poor children and the disabled.

He also has called for manned missions to the moon and Mars. Some budget analysts say the idea, which the administration might achieve with a 5% annual increase in NASA’s $15-billion budget, is a fanciful luxury when the budget is swimming in red ink and domestic programs are being squeezed.

“The only thing boldly going where no one has gone before will be the U.S. deficit,” said Stan Collender, a budget expert with Fleishman-Hilliard, a public relations firm.

Another area slated for growth is the Pentagon, where the budget is expected to top last year’s $380-billion request by as much as $20 billion.

Military officials say the budget will increase spending on elite special operations forces, unmanned spy planes and robotic technologies to fight the war on terrorism. It will emphasize getting new protective gear for soldiers and for aircraft and keep funds flowing into two new multibillion-dollar jet fighters.

Bush will include more tax-cut proposals -- mostly by reviving proposals that were introduced but not passed last year. A top priority is to make permanent the tax cuts passed in 2001.

Times staff writers Esther Schrader, Ricardo Alonso-Zaldivar, Richard Simon, Aaron Zitner and Elizabeth Shogren contributed to this report.