Overall spending has skyrocketed under Bush, GOP

WASHINGTON — President Bush renewed his call for spending restraint when he sent his proposed fiscal 2007 budget to Congress on Monday, but one thing is clear: The era of big government is far from over.

Over the past five years, Bush and the Republican-led Congress have been far better at expanding government than shrinking it. Spending for national security and government entitlement programs has skyrocketed, without offsetting cuts in other programs.

"At the beginning of the year, there's a lot of talk about spending restraint and reducing the deficit. At the end of the year, that's all kind of forgotten," said Steven Kosiak, the director of budget studies at the Center for Strategic and Budgetary Assessments, a Washington think tank that specializes in defense issues.

The government produces a budget deficit when its total spending exceeds its total revenues. Budget deficits cause the government to borrow more money by selling Treasury securities to domestic and foreign investors. As the government seeks to borrow ever more to finance those deficits, rates on Treasury securities rise to entice investors. That pushes up other interest rates, such as home mortgages, many auto loans, some home equity lines of credit and some credit cards.

In a worst-case scenario, foreigners who finance the U.S. budget and trade deficits would sour on U.S. investments and unload their holdings. The prices of U.S. stocks and bonds could plunge. Interest rates, including those for mortgages, could soar.

Tax revenues flowing to the federal government declined in the first three years of Bush's presidency, driven down by tax cuts and a mild recession. They have since rebounded as a result of economic growth and other factors, but federal spending has increased even more.

The $128 billion budget surplus that Bush inherited in 2001 has turned into a deficit of at least $337 billion this year.

So where's the money going?

More than 60 percent of the budget is devoted to programs that are essentially on autopilot — interest payments and the so-called entitlement programs, primarily Social Security, Medicare and Medicaid. Roughly another 20 percent is devoted to defense and homeland security.

Bush's proposed defense budget for 2007 is $439 billion, up from $334 billion the year he took office. Spending for homeland security has more than doubled, from $17 billion in 2001 — in a budget approved before the Sept. 11 attacks — to $50 billion this year.

Those figures don't include the wars in Iraq and Afghanistan. That's another $440 billion so far, mostly for Iraq, where expenses are piling up at a rate between $4.5 billion and $8 billion a month.

In the post-Sept. 11 world, national-security spending is virtually sacrosanct in Congress. Entitlement programs are considered even more untouchable, although lawmakers took a rare stab at cutting them Wednesday.

In a 216-214 vote, the House of Representatives approved a five-year, $39 billion deficit-reduction bill that included cuts to Medicare and Medicaid. It was a bruising fight, requiring a tiebreaking vote from Vice President Dick Cheney in the Senate, but the cuts will have little impact on the massive programs.

The Medicare spending reductions are minuscule compared with the cost of the prescription-drug benefit that Congress added to the program in 2003. It is expected to cost more than $30 billion this year alone. The anticipated cost over the next 10 years is $678 billion.

Robert Bixby, the executive director of the Concord Coalition, a bipartisan group that advocates a balanced federal budget, said lawmakers were merely "nibbling around the edges" of entitlement costs with their $39 billion in cuts.

"It's not very significant at all," Bixby said. "My guess is that they won't take another plunge into the entitlement pool."

With national security and entitlements essentially off the table, the only real targets for budget cuts are the "nons" — non-defense, non-homeland security domestic programs. In other words, the roughly 18 percent of the budget that goes for things such as education, environmental protection, transportation and other government services. They're feeling the pinch.

Last year, Bush proposed to cut non-security spending by about 1 percent. His 2007 budget cuts is expected to cut a little deeper. But the cuts are spread unevenly. For example, Bush targeted the Environmental Protection Agency for a 6 percent cut last year, while the Interior Department escaped with a 1 percent cut.

While the president's proposed cuts in those domestic programs always generate howls of protest, they don't really change the overall budget picture.

"It's just not that big a chunk of the budget. You've got to go where the money is," Kosiak said, referring to the entitlement programs. "There's a lot of rhetoric about spending restraint, but there's been no serious effort to actually address the deficit. Part of the problem is there's no consensus on how to do it."

Few in Washington expect to see much restraint this year, especially with lawmakers looking ahead toward the November elections.

"Spending has gone up dramatically in this administration and taxes have gone down dramatically," Bixby said. "My definition of fiscal responsibility is, are you paying for the government that you want? And we're not."

The nonpartisan Congressional Budget Office forecasts deficits every year through 2015; that is as far out as the office projects. The White House forecast, which runs to 2010, also expects annual shortfalls.

In 2008, the oldest of the boomers will reach 62, the earliest age at which they can tap Social Security retirement benefits. Three years after that, in 2011, they will reach 65 and become eligible for Medicare.

Additional information from The Associated Press