By Andrew Taylor

The Associated Press

Saturday 02 February 2008

Washington - President Bush wants to cut funding for teaching hospitals and freeze medical research in a $3 trillion budget for 2009 that is still likely to generate a record deficit once war costs are tallied up.

The Bush budget to be submitted Monday would cut the budget for the Health and Human Services Department by $2 billion, or 3 percent. By contrast, the Pentagon would get a $35 billion increase to $515 billion for core programs, with war costs additional.

With tax revenues falling as the economy slows - and with the deficit-financed economic stimulus bill adding more than $150 billion in red ink to federal ledgers over 2008-2009 - the White House acknowledges that the budget deficit for this year and next is projected to reach $400 billion or more.

The largest-ever budget deficit, $413 billion, was recorded in 2004. Bush's budget will forecast a deficit for 2009 that's below that, an administration official said. But that assumes costs of $70 billion for the wars in Iraq and Afghanistan, well below the almost $200 billion request for this year.

Even if a Democrat is elected president and begins troop withdrawals, tens of billions of dollars more will be needed, which would bring the deficit well above the $413 billion record.

And if the economy slides into recession, deficits would grow ever higher. The Bush budget predicts gross domestic product growth of 2.9 percent for 2008, an administration official said, much higher than private sector economists predict. If growth doesn't meet administration expectations, the deficit would spike higher as tax revenues fall even more.

Economists say the best way to measure the deficit is against the size of the economy, and at about 3 percent of gross domestic product, the 2008-2009 deficits aren't much higher than historical averages. To the average member of the public, however, the raw figures are eye-popping, and Bush's successor is likely to feel pressure to rein the deficit under control.

Bush has promised his budget will keep the government on track to run a surplus in 2012. But the steps required to do that - and keep his promise to extend tax cuts enacted in 2001 and 2003 beyond their expiration at the end of 2010 - are hardly realistic.

For starters, his budget contains no war costs beyond 2009 and fails to address the huge cost of keeping more and more taxpayers from feeling the bite of the alternative minimum tax.

Bush's budget plan will also, on average, freeze most domestic programs funded by Congress each year. Since departments such as Veterans Affairs and Homeland Security will be getting increases, that means other agencies would bear difficult cuts.

The budget for the Health and Human Services Department, for example, would be reduced by almost 3 percent under the Bush budget plan to be released Monday. The $2 billion in HHS cuts are about double the size of the reductions Bush sought last year; Democrats controlling Congress rejected them.

Congress is ultimately likely to reject the cuts again, but the White House played a tough hand in last year's budget battle and the gulf between the two could mean gridlock that would tie up the agency's budget until Bush's successor takes office. The cuts would hit HHS programs funded by Congress each year.

These reductions would be in addition to almost $200 billion in cuts to Medicare and Medicaid over the next five years that administration officials acknowledge are in Bush's budget. Much of the savings would come from freezing reimbursement rates for most health care providers for three years.

Congress rejected a smaller package of cuts last year, and there's no reason to think they would rise to the challenge in an election year. The proposed savings from Medicare and Medicaid are about three times the cuts proposed last year.

Within HHS programs, Bush would eliminate a $302 million program that gives grants to children's hospitals to subsidize medical education. A $300 million program for public health improvement projects would be eliminated, while grants to improve health care in rural areas would be cut by 87 percent.

The Centers for Disease Control's budget would face a 7 percent reduction of $433 million. The budget for a program to treat and monitor the health of first responders and others exposed to toxins at the World Trade Center after the Sept. 11 attacks would be cut by 77 percent, from $108 million this year to $25 million in 2009.

The National Institutes of Health, which funds health research grants, would see its budget frozen at $29.5 billion.

A program providing grants to help mental health and substance abuse providers update their treatment programs would be cut almost in half. Bush also would eliminate a new $49 million program to help states provide health insurance to people who are ailing and cannot obtain health insurance in the commercial market.

There are a few increases, however. The Food and Drug Administration would receive a 6 percent boost to $2.4 billion to ramp up food and drug safety efforts. Head Start would receive a 2 percent increase to $7 billion. Abstinence education programs popular with social conservatives would get a 25 percent increase to $137 million.

At the same time, a popular program that provides heating subsidies to the poor would be cut by $570 million, to $2 billion.

As expected, the budget would eliminate the $654 million Community Services Block Grant program, which provides seed money for community action agencies that help the poor. That cut was proposed last year, but Congress rejected it on a bipartisan basis.

Within the Education Department, Title I grants, the main source of federal funding for poor students, would get $14.3 billion, about a 3 percent increase from this year, under the administration's proposal. About half of the nation's schools, and two-thirds of elementary schools, receive Title I funding.

The administration proposes to spend about $11.3 billion for special education services for students with disabilities, an increase of roughly $330 million.

-------