Revised March 5, 2004


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A new Center report, Analysis of the President’s Budget, finds the proposed budget would worsen the nation’s fiscal problems while largely exempting affluent and powerful constituents from measures to restore fiscal discipline.  The budget:

Figure 1

One particularly stark example of the cuts in domestic discretionary programs is the treatment of the housing voucher program, the nation’s principal low-income housing assistance program.  Its funding for 2005 would fall more than $1.6 billion short of the amount needed to continue the vouchers that are in use, a shortfall that could lead to 250,000 fewer low-income families and elderly and disabled households receiving housing assistance.

The cuts proposed for 2006-2009 are largely hidden; for the first time in recent memory, proposed “out year” funding levels are not shown in the Administration’s budget books and can only be found in the 1,000-page OMB computer run that underlies the budget.  Yet these cuts are a basic part of the budget.  In fact, the Administration is proposing the enactment of discretionary spending caps that could lock in cuts of this magnitude.

While the discretionary spending cuts are being presented as a way of controlling the deficit, the amounts they would save in 2009 equal only a small fraction of the cost of the tax cuts.  In fact, the combined savings from all of the domestic discretionary cuts would be substantially smaller than the cost of the tax cuts just for the top one percent of households, a group whose income this year exceeds $310,000.

Furthermore, under the proposed budget rules, the only offsets that could be used to pay for entitlement improvements would be cuts in other entitlement programs.  Tax savings, such as from closing abusive corporate tax shelters, could not be used for this purpose.

End Note:

* Between 2000 and 2004, the budget declined by an amount equal to 6.6 percent of GDP, from a surplus of 2.4 percent of GDP to a deficit of 4.2 percent of GDP.  This was the largest budgetary deterioration in U.S. peacetime history.  The steep drop in revenues — which fell by an amount equal to 5.0 percent of GDP during this period — was responsible for 76 percent of this deterioration.