Budget Watch: If You Don’t Pay Attention, Who Will?
Government affects many aspects of our lives, including our pocketbooks. So it’s essential for us to know where our tax dollars go as well is who is getting taxed what.
Take a look at the Facts and Trade-Offs of President Bush’s budget proposal. Its details could affect your everyday life. From health care to education to Iraq, the budget sets a blueprint for the year(s) to come.
Budget basics
The new budget will be in effect October 1, 2007, or fiscal year 2007, so Congress has several months to evaluate and approve it. The review will start out in the House Budget Committee, which will assess Bush’s $2.9 trillion plan.
Bush’s budget includes:
-- $100 billion more for the wars in Iraq and Afghanistan for fiscal year ’07 and $145 billion for fiscal year '08.
-- 11 percent increase in other (non-war) Pentagon spending to $481.4 billion.
-- A cut of $95 billion over five years in the government's major health programs such as Medicare and Medicaid.
-- Elimination or sharp reduction 141 federal programs totaling $12 billion -- which Congress has rejected in the past.
-- Make permanent Bush’s tax cuts, due to expire in 2010, thereby reducing federal income that would otherwise amount to $1.6 trillion over 10 years.
The details- Iraq, Afghanistan, and Pentagon
Rob Portman, director of Bush's Office of Management and Budget, said that in response to the Democratic victory in the 2006 midterm election, with the Democratic Congress, the administration included in the budget plan $100 billion in special spending for Iraq and Afghanistan for the current year, along with another $145 billion for the wars in the coming year. The war spending raises the Pentagon's proposed '08 budget to $624.6 billion.
Legislators in both parties have protested the administration’s insistence on paying the skyrocketing bill for Iraq and Afghanistan through supplemental spending bills instead of including the costs in the regular budget process. While the administration says that military costs cannot be anticipated well enough to be included, lawmakers have criticized this approach for disguising how much we are really paying for the war.
The plan also includes $50 billion for Iraq in fiscal 2009, which Portman admitted does not mean that Bush foresees less U.S. involvement in the war. Instead, he said, the figure is a "placeholder," signaling to Congress that the administration sees a continued U.S. presence in Iraq.
Democrats promised to pore over the budget for Iraq, a war that many of them oppose. House Armed Services Committee Chairman Ike Skelton (D-Mo.) said that Congress must scrutinize how much of the Pentagon increase goes to enhancing readiness and future defense capabilities, and how much is being spent to further the fight in Iraq.
The White House pointed out that much of the Pentagon increase will go to pay for a larger military, which has been sought by many Democratic leaders, and to replace or repair equipment lost or worn out in Iraq.
Medicare and Medicaid
Medicare and Medicaid spending account for $1 out of every $4 spent by the federal government. So, in his attempt to balance the budget by 2012, President Bush has requested cuts from both programs.
The budget would reduce Medicaid spending by about $25 billion over five years and Medicare spending by $66 billion over five years. That means the cost of the health care program for seniors would grow percent rate, budget officials said.
Health care providers would also get smaller pay increases when caring for the elderly, poor, and disabled. Hospitals, nursing homes and other providers say that they can’t afford lower payments from the government.
Democrats are unlikely to accept these cuts. Representative Pete Stark (D-Calif.) described the Medicare and Medicaid proposals as "declaring war" on the poor and elderly. Stark, who oversees the House Ways and Means Committee’s health subcommittee, said that savings can be achieved by targeting payments to health care providers, but not in the ways that President Bush proposes.
Stark said that Congress can lower payments to the insurance companies that provide managed care for seniors, instead of the doctors and nursing homes. The Bush administration opposes this concept, but Senator Max Baucus, (D-Mont.) chairman of the Senate Finance Committee, agrees that payments to insurance companies that provide managed care should be "on the table" of potential spending cuts.
141 programs cut
From fiscal 2007 to fiscal 2012, total spending would be allowed to rise 15 percent. Security-related spending would increase by 23 percent over five years, but non-security spending, which is discretionary, would rise just 5 percent, far less than the expected rate of inflation.
Bush’s budget also assumes the elimination or reduction of 141 discretionary spending programs like Medicare and Medicaid, saving $12 billion. A list of the programs to be sliced is expected to be released separately later this week.
Tax cuts
President Bush’s budget proposal affects how much money the government making as well as spending. Take a look at a few of the tax changes:
- Permanently extend the 2001 and 2003 tax cuts including reduced rates on capital gains and dividends, phase-out and temporary repeal of estate tax, and special tax credits for parents and students. Loss of Tax Revenue: $373.9 billion over five years, $1.62 trillion over 10.
- Permanently extend teachers' tax deduction for out-of-pocket classroom expenses. Loss of Tax Revenue: $754 million over five years, $1.7 billion over 10.
- Make permanent the research and development tax credit. Loss of Tax Revenue: $41.8 billion over five years, $117.3 billion over 10.
- Extend alternative minimum tax relief for one year (2007). Loss of Tax Revenue: $36.5 billion.
A Major Philosophical Switch
Examples of some of the changes reveal the administration’s philosophy of reducing the government sponsored safely and increasing individual responsibility for health and financial safely:
- Expand health care tax incentives to encourage individuals to buy medical insurance; expand Health Savings Accounts. Loss of Tax Revenue: $124.9 billion over five years, $5.3 billion over 10.
- Revise tax incentives for saving by creating Lifetime Savings Accounts and Retirement Savings Accounts to replace some Individual Retirement Accounts; consolidate employer-based savings plans. Revenue Increase: $7.2 billion over five years. Loss of Tax Revenue: $2.1 billion over 10.
- Establish tax breaks to encourage charitable giving. Loss of Tax Revenue: $2.8 billion over five years, $6.9 billion over 10.
House Minority Leader John Boehner of Ohio argues that Bush's tax cuts are the key to eventually producing a budget surplus, and he warned Democrats against any tax increase, even on the wealthy.
Democrats argue that Bush’s plan benefits the very wealthy and will continue to widen the gap between the rich and the middle class.
Can we go from deficit to surplus?
President Bush claims that his plan will balance the budget by 2012, four years after he leaves office. His projection is based on continued economic growth and federal spending restraint. But Democrats said his projection of a coming surplus was based on faulty assumptions.
For one thing, they say, his projections don't include Social Security costs, or the costs of the continuing war in Iraq past the upcoming fiscal year. And they say, if Congress were to follow Bush's request and make permanent his tax cuts, deficits would continue for years to come.
What do you think?
Can we cut taxes and pay down our deficit? Which parts of the Bush plan do you agree with/ disagree with? Where would you like to focus your tax dollars? What don’t you want your dollars to support? Does your representative know what you think?
Look up your representatives and their committees here:
You can also discuss details with other WomenMatter readers on our blog.
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Article Posted on: 2/11/2007
