President Bush on Monday sent Congress a $1.45 trillion budget that he said would allow America to move from recession to a "new era of expansion." But the document is likely to be remembered more for its record deficits than for any new initiatives.
The spending plan for the fiscal year starting Oct. 1 seeks more money for the war on drugs, space exploration, education and highway construction. But the increases are mostly modest, in some cases amounting to only small pilot programs.To pay for the programs being increased and to help reduce the budget deficits, the administration is seeking to save $46.6 billion over five years by cutting such government programs as Medicare, guaranteed student loans, crop insurance and subsidies for wealthy farmers.
The budget acknowledges that the country is mired in a recession, but unlike past presidents, Bush offered no government spending initiatives to fight the downturn. Instead, he said his budget focuses on efforts to improve America's long-term competitiveness.
The budget is based on an optimistic forecast that the recession will be brief and mild with the economy growing again in the second half of this year.
If this forecast proves inaccurate, the deficit would balloon even more. Another major threat to the president's budget is the cost of the Persian Gulf war.
The document - a single blue book of 2,029 pages and weighing 7 pounds - was released Monday and includes what Bush termed a "placeholder" amount of $15 billion for increased military spending for a war that is estimated could cost anywhere from $28 billion to $86 billion.
Bush said he would send Congress a supplemental request to cover costs of the fighting in coming weeks. White House Budget Director Richard Darman said the bulk of the fighting should be financed by contributions from U.S. allies, but that assumption, like many of the others in the budget, was certain to be questioned. Congress is likely to make major changes in the president's spending blueprint.
The administration laid the blame for the recession and the escalating budget deficit at the door of Saddam Hussein.
"The longest peacetime expansion was interrupted by the oil shock following Iraq's invasion of Kuwait," said presidential economist Michael Boskin.
In his message, Bush conceded that the economy was in a slump, but he said, "We can, however, return to growth soon - and proceed on the path to a new era of expansion."
The administration did not propose any tax increases to help narrow the deficits but instead called for a tax cut in capital gains, the profits earned from the sale of investments. This proposal stirred heated controversy and was rejected over the past two years with Democrats charging that it is a giveaway to the rich.
The administration also proposed allowing penalty-free withdrawals from individual retirement accounts for first-time home buyers and creation of a new tax-free family savings plan, both ideas were rejected by Congress last year.
In a reprise of the "new federalism"proposals put forward by Ronald Reagan and Richard Nixon, the administration provides a laundry list of $21 billion in federal programs, which it said could be turned over to the states along with the money to pay for them. The list included everything from aid to public libraries to sewage construction grants.
The president said he hoped Congress would select at least $15 billion in programs from this target list for the turnover. The proposal to turn the programs over to the states "moves power and decisionmaking closer to the people," Bush said.
Summarizing the budget, the administration said it was proposing spending increases of $17.8 billion for 250 separate government programs and spending cuts of $8.3 billion for another 109 programs.
It proposed total elimination for another 238 mostly small government programs including eliminating federal support for cleaning up asbestos contamination in schools. The eliminations would translate into $4.6 billion in savings.
But overhanging the entire budget were the forecasts for the largest deficits in U.S. history. The budget said the deficit for the current fiscal year would hit $318.1 billion, meaning that through this year the government will be going into debt at a rate of nearly $1 billion a day.
For fiscal 1992, the president's budget forecasts that the deficit will decline slightly to $280.9 billion. That figure that still would be far above the record of $221.1 billion set in 1986 and would dwarf the $25 billion that the administration had predicted just a year ago.
The administration blamed the flood of red ink on the recession and on the huge costs of rescuing insolvent banks and savings and loans.
Darman pegged $105.5 billion of the 1991 deficit increase on the financial system bailout and said another $87 billion was caused by falling government receipts, due primarily to the recession.
The 1992 budget calls for government spending of $1.446 trillion, a 2.6 percent increase over the current fiscal year. That means the overall increase will not keep up with inflation, which the budget forecasted would run at an annual rate of 4.3 percent this year.
Among the details of the 1992 budget:
- Savings of $25.3 billion in the Medicare health program over five years with the bulk of the savings coming by reducing payments to doctors and hospitals.
- The budget projects spending $88.1 billion for bailing out insolvent savings and loans and banks, down from an estimated cost of $111.5 billion this year.
- The war on drugs would get an 11 percent increase to $11.7 billion. Programs that provide health care for women and young children and that help public housing tenants buy their homes also would get more money.