**PRESIDENT'S BUDGET: MORE OF THE SAME MISPLACED PRIORITIES**

***PUTTING SPECIAL INTERESTS AHEAD OF AMERICA'S FAMILIES***

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| > **Key Points:**                                                     |
|                                                                       |
| -   **The Bush Administration's FY 2008 budget continues with more of |
|     the same wrong priorities of the past six years \--** **the same  |
|     fiscal irresponsibility and misplaced priorities; it takes our    |
|     country in the wrong direction.**                                 |
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| -   **The President's budget is [fiscally reckless]{.underline},      |
|     adding \$3.2 trillion to the deficit over the next 10 years using |
|     honest accounting. Despite the President's claims, his budget     |
|     does [not]{.underline} achieve balance in 2012.**                 |
|                                                                       |
| -   **The budget is [morally irresponsible]{.underline}, slashing     |
|     funding for key priorities, such as health care and education,    |
|     critical to strengthening America's middle class.**               |
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Democrats believe that on every issue our nation faces, we must pursue
policies that take our country in a new direction. The Bush
Administration's FY 2008 budget fails on that score; it continues with
more of the same wrong priorities of the past six years that have failed
the American people. It is [fiscally reckless]{.underline}, adding
trillions to the deficit over the next 10 years, and [morally
irresponsible]{.underline}, slashing funding for key priorities, such as
health care and education, critical to America's middle class. Democrats
are fighting for a budget that reflects the values of America's middle
class. We are working to restore fiscal responsibility and to deliver
results to the American people, along with economic prosperity, a strong
national defense, affordable health care and energy prices, and strong
public schools.

**The Republican budget is fiscally irresponsible, creating trillions of
dollars in new deficits that threaten our economy.** The Republicans'
fiscal recklessness is a tax on our future, creating a deficit in 2007
that is likely to reach \$244 billion. The President's budget creates
trillions in new deficits over the next 10 years, squandering nearly \$2
trillion on tax breaks for the wealthy and increasing the national debt
by \$2.5 trillion over five years. The President claims that his budget
is in balance by 2012, but that is only because he leaves out enormous
costs from his budget, including the five-year costs of fixing the
Alternative Minimum Tax and the full costs for the Iraqi war (assuming
only \$142 billion for FY 2008 and \$50 billion for FY 2009).
Republicans have already taken a projected 10-year surplus of \$5.6
trillion, and turned it into a \$2.8 trillion deficit, and this budget
continues this path of mortgaging the future of our children and
grandchildren with deficits totaling \$3.2 trillion over the next 10
years under honest and realistic accounting.

**Military Spending/War in Iraq** -- The President's budget requests
submitted to Congress today include an eye-popping [\$716.5
billion]{.underline} for the Department of Defense and for war-related
costs. This total of \$716.5 billion includes: a \$481.4 billion FY 2008
base budget request for the Department of Defense; a \$141.7 billion FY
2008 budget request for war costs; and a \$93.4 billion FY 2007
supplemental budget request for war costs. If the President's requests
are approved, the U.S. will spend nearly \$50 billion more on the wars
in Iraq and Afghanistan in the current fiscal year than was spent in FY
2006, and will spend at least an additional \$142 billion next fiscal
year. [These huge sums demand the most rigorous congressional scrutiny
possible.]{.underline} Furthermore, the President is understating the
true costs of his new Iraq strategy. The nonpartisan CBO estimates that
the Pentagon will need to send [as many as 48,000 troops]{.underline} to
implement the President's new strategy, at an estimated cost of [\$20
billion to \$27 billion]{.underline} for a year-long deployment. In
discussing sending an additional 21,500 combat troops to Iraq, the
President has failed to account for the number of support personnel the
Pentagon customarily sends with any deployment of combat brigades.

**The Republican budget is morally irresponsible, slashing funding for
critical domestic initiatives.**

-   **Medicare and Medicaid** -- The President's budget slashes Medicare
    and Medicaid by about \$300 billion over the next ten years -- with
    legislative and regulatory Medicaid cuts totaling about \$50 billion
    and Medicare cuts totaling \$252 billion. Rather than using these
    monies to reverse the growing number of uninsured Americans (with an
    additional 6.8 million uninsured Americans since President Bush took
    office), almost all of these monies would finance tax cuts for
    millionaires. The Medicare cuts include premium increases for
    millions of beneficiaries totaling \$10 billion over the next 10
    years. At the same time that the budget slashes Medicare funding, it
    protects special interests. It leaves untouched massive overpayments
    by Medicare to HMOs under the GOP 2003 "Medicare Modernization Act."
    Many of the federal Medicaid cuts will simply increase state costs
    or lead to further restrictions in Medicaid benefits. Thus, instead
    of assisting state efforts to reduce the number of uninsured, the
    Bush budget will impede these efforts.

-   **Health Care** -- Under the President's budget, employee health
    benefits would, for the first time, be treated as income and would
    be subject to income and payroll taxes, just like wages. At the same
    time, the President would create a tax deduction for health
    insurance of \$15,000 for families and \$7,500 for individuals. This
    proposal would [fail]{.underline} to reduce the number of uninsured.
    It would also mean [a tax increase]{.underline} for millions of
    middle-class families who have employer-sponsored health insurance
    worth more than \$15,000. (Also, because the new deduction would
    reduce taxable income, people's future Social Security benefits
    would be reduced as well.) As many health experts have pointed out,
    the President's proposal would undermine employer-provided health
    insurance, and would push people into the individual health
    insurance market -- a market where insurers are able to refuse
    coverage to workers based on their health. As Karen Davis, head of
    the nonpartisan Commonwealth Fund, has pointed out about the
    President's proposal, "It's not solving the uninsured problem, and
    it's not solving the cost problem, so it's not really advancing what
    we need to have happen."

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-   **Energy** \-- President Bush promised in his State of the Union
    speech that his Administration was committed to reducing our
    dependence on foreign oil. The President's budget fails to fulfill
    this promise. For example, total energy efficiency and renewable
    energy funding is essentially at the level in FY 2001. In addition,
    the President's budget severely cuts Weatherization Assistance and
    Low Income Home Energy Assistance. Further, his budget cuts funds
    for the renewable energy grants program.

-   **Homeland Security** -- The President's request for the Department
    of Homeland Security is only a little more than 1 percent above the
    FY 2007 enacted level. This is a modest increase for a department
    that is charged with such a critical mission and has yet to meet its
    goals for protecting the country. Particularly disappointing is the
    President's request for programs that support first responders.
    Under the President's budget, state preparedness grants and training
    would be reduced by 33 percent, to \$1.7 billion, down from \$2.5
    billion; and firefighter grants would be reduced by 55 percent, from
    \$662 million to \$300 million. State and local law enforcement
    grants through the Department of Justice would also undergo cuts,
    thus depriving our communities of the critical support they need to
    operate in the post-9/11 world.

-   **Education** -- Appropriations for education programs are cut more
    deeply for each of the next three years, cutting 2010 funding by
    \$3.1 billion below the FY 2006 enacted level. Pell Grants are
    increased, but at the cost of recalling all Perkins Loan funds and
    eliminating nine other higher education assistance programs. Funding
    for the President's signature program, No Child Left Behind, which
    is up for renewal, would remain about \$15 billion
    [below]{.underline} the level promised when the bill was signed into
    law.

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-   **Veterans & Military Retirees** \-- The President's budget
    continues to shortchange veterans' health care, cutting veterans'
    health care by \$3.5 billion over five years and providing less than
    veterans' service organizations say is needed to meet the growing
    needs of veterans, including those returning from Iraq and
    Afghanistan this year. For the fifth year in a row, the budget
    raises health care costs on 1.3 million veterans, imposing \$4.9
    billion in increased co-payments on prescription drugs and new
    enrollment fees on veterans over ten years. The budget increases
    TRICARE health care premiums for the nation's military retirees and
    includes several other changes in military health care that have
    been rejected in previous years. If these proposals are not
    successful in FY 2008, the budget for military health care will be
    underfunded by between \$1.8 billion and \$2.3 billion.

-   **Economy and Jobs/Innovation \--** Three million manufacturing jobs
    have been lost over the past six years, and families are struggling
    to make enough to pay the bills. The budget slashes funding for the
    Manufacturing Extension Partnership (MEP), which helps small U.S.
    manufacturers with everything from plant modernization to employee
    training, by nearly 60 percent, and funding for the Advanced
    Technology ProgramNumber range CHAPTER, which sponsors research to
    solve manufacturing problems.

-   **Rural Communities \--** Once again this year, the budget freezes
    funding for rural education and phases out rural health grants. In
    fact, the President\'s proposal shortchanges critical rural
    initiatives, such as renewable energy and conservation and economic
    development, which could potentially hamper Congress\' effort in
    creating a strong, forward-looking farm bill.

-   **Social Security Privatization \--** Despite the American public's
    clear opposition to his flawed privatization plan, the President'
    budget still turns Social Security's guaranteed benefit into a
    guaranteed gamble in 2012.

**Democrats are committed to a new direction for America** in which the
interests of America's families take priority over the special
interests. That kind of honest leadership is needed to bring real
solutions to the American people, along with economic prosperity, a
strong national defense, health care that works for everyone, fiscal
responsibility, and strong public schools. Democrats insist upon fiscal
discipline with budgets that pay as you go, and over the coming months,
we will fight for a budget that reflects the values of America's middle
class. Together, America can do better than out-of-control deficits and
misplaced priorities.

![](media/image1.wmf) Office of Speaker Nancy Pelosi, February 5, 2007