The next president will inherit a deficit of about $400 billion, and maybe more. Unless the economy rebounds and revenue pours in, deficits will push the cumulative federal debt past $12 trillion in the next five years.
He or she will need to spend far more in Iraq and Afghanistan than Bush proposed, because he included only $70 billion — designed to last until Jan. 20, when he leaves office. White House budget director Jim Nussle said Monday that even the cost of drawing down forces is "surprisingly high."
He or she will face the expiration of Bush's tax cuts, passed in 2001 and 2003. While the leading candidates opposed them, allowing any to expire after 2010 will feel like a tax increase and has all its political risks.
He or she will be closer to the projected fiscal crises facing Medicare and Social Security, which lack the tax flow to pay for benefits promised to baby boomers. Bush's call for $208 billion in entitlement savings over five years has no chance in this election-year Congress.
"Congress needs to know that every year they delay, the problem gets harder," Nussle said. "Every year they delay, it becomes closer to the time when this unfunded obligation is actually going to collapse on the country."
But delay they will, as they have done every year since 1997, the last time a president and Congress came together to slash the deficit. Helped by a surging economy, the balanced budget measure led to surpluses from 1998 through 2001. Then came a recession, the 9/11 terrorist attacks, wars in Afghanistan and Iraq and hurricanes that devastated the Gulf Coast.
The $407 billion deficit that Bush predicts will greet his successor could be even larger. "Once again, the president has tried to conceal the true fiscal impact of his budget by leaving out large costs," said Senate Budget Committee Chairman Kent Conrad, D-N.D.
The president's budget:
• Counts on a freeze in most domestic spending — an unrealistic proposal for a Democratic-led Congress facing re-election. Proposals such as eliminating the popular COPS street-patrol program or trimming energy assistance for low-income families have little chance of passage.
• Cuts nearly $20 billion in grants to state and local governments for programs other than Medicaid, according to the liberal Center on Budget and Policy Priorities. Members of Congress always come to the defense of their states, particularly when about half of them are projecting budget gaps.
• Counts on imposing the alternative minimum tax on millions of additional taxpayers in future years — something Congress is sure to avoid, at considerable cost. The AMT increases taxes on people with large deductions but has been adjusted every year to prevent being imposed on the middle class. "That is as certain as anything can be in politics," said Stan Collender, a budget expert at Qorvis Communications.
• Relies on a $178 billion reduction in Medicare's projected growth over the next five years, nearly three times the size of his rejected proposal last year. Congress won't go along — yet. Budget experts agree the day of reckoning will come.
"In the long run, the most important part of the budget is the president's challenge to Congress to finally address the unsustainable long-term costs of entitlements," said Brian Riedl of the conservative Heritage Foundation. "The longer lawmakers wait to enact the necessary reforms, the more painful those reforms will be."
All of those policies allow the president to claim that the budget will reach surplus in 2012, lawmakers said. "To think that anyone has the audacity to suggest that the deficit will be gone in five years under the president's plan is almost laughable," said Senate Majority Leader Harry Reid, D-Nev.
Rep. John Spratt, D-S.C., chairman of the House Budget Committee, said a more likely scenario is a deficit that remains in the $200 billion range in 2012. "Far from proposing a plan to fix the budget, the Bush administration proposes policies that worsen it and, with little compunction, leaves the consequences for the next administration and future generations to correct," he said.
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