Last week the White House issued a request for an additional $72 billion in supplemental funding for war costs. To find out how this cost plays out in your specific state, check out the National Priorities Project website.

President Bush's FY 2007 budget includes two proposals that mask the true cost of extending the 2001 and 2003 tax cuts, which Bush claims to be one of his najor goals in 2006. As this Center on Budget and Policy Priorities report states,

One proposal calls on Congress to adopt a new scoring convention that would make the cost of extending the 2001 and 2003 tax cuts disappear; under this proposal, legislation to make these tax cuts permanent would be officially “scored” as having zero cost. The other proposal would promote a dubious technique for assessing tax policy changes that, depending on the assumptions used, could be used to manufacture cost estimates showing various tax-cut proposals as having little or no cost.

In a column in today's Washington Post, David Broder calls this the "Trillion Dollar Gimmick." The OMB's budget itself, Broder highlights, says, "the 2001 Act and 2003 Act provisions were not intended to be temporary, and not extending them in the baseline raises inappropriate procedural roadblocks to extending them at current rates." In other words, if Congress knew the true cost of making those tax cuts permanent, they would possibly have second thoughts in supporting Bush's plan to make those cuts permanent. As Broder says, this is why it is especially important when looking at the President's budget to "Watch what we do, not what we say."

The White House submitted a $92.2 billion FY2006 supplemental spending request yesterday, which includes $72.4 billion for military operations in Iraq and Afghanistan and intelligence activities, and $19.8 billion for Gulf Coast rebuilding costs. The Pentagon, which currently spends about $6.8 billion per month, will receive $65.3 billion to get through the current fiscal year.

The requests put the total war cost at $115.3 billion for this year alone, as the budget submitted by the president last week requested only $50 billion for all of next year. While the measure will most likely be approved, it does face skepticism from Congressmen who are up for reelection this year and/or wary of the amount of money already spent on this war. Rep. David Obey (D-WI) stated:

"President Bush declared 'mission accomplished' on May 1, 2003. Hundreds of billions of dollars later, the administration continues to hide the war's full costs with piecemeal requests so that they don't have to take responsibility for its impact on the budget and can continue down a fiscally reckless path."

For a comprehensive table prepared by Obey's staff of Department of Defense funding for Iraq and Afghanistan from FY01 - FY07, click here.

The House Budget Committee held a hearing today on performance evaluations and spending trends. Clay Johnson of the Office of Management and Budget testified, along with Brian Reidl of the Heritage Foundation and Bob Greenstein of the Center on Budget and Policy Priorities. Johnson spoke of the importance of accountability in government spending as well as OMB's new performance website, but refused to recognize the hypocrisy surrounding some of the budget decisions made after these programs are evaluated by OMB's standards. Testimony and opening remarks are below:

Yesterday a nonpartisan group released a study claiming that the amount of federal grants given to faith-based organizations has declined from 2002 to 2004, as the total amount of funding available for federal grants has decreased over the past three years. The study was conducted by the Roundtable on Religion and Social Welfare Policy. The group examined 28,000 grants made by nine federal agencies over three years. Kay Guinane of OMB Watch was quoted yesterday in a Washington Post article about the study, staying that it:

"is confirmation of the suspicion I've had all along, that what the faith-based initiative is really all about is de-funding social programs and dumping responsibility for the poor on the charitable sector. It sounds warm and fuzzy, but they've been cutting down the size of the pie all along."

Washington Post: Grants to Religious Groups Fall, Study Shows

After internal party debate, Democrats have decided to call for a revote on the budget reconciliation bill which recently passed the House by an extremely close vote of 216-214. The bill ran into trouble when it became known that the President signed a different version than that which was passed by Congress. Because the cuts passed in the bill are so contentious, Democrats have chosen to put the spotlight back on the issue by calling for a revote, as opposed to allowing the fixed bill to pass easily under unanimous-consent agreements.

Sen. John McCain (R-AZ) introduced a bill yesterday -- called the "Pork Barrel Reduction Act" -- meant to crack down on the use of earmarks in appropriation bills and conference reports. The bill would allow senators to oppose earmarks by raising a point of order. Senate rules require 60 votes to waive a point of order, and if one is waived the earmark would stay in the bill or conference report. The bill is being co-sponsored by Sens. Russ Feingold (D-WI) and Evan Bayh (D-IN), and it would also:

• require conference reports to be filed and available publicly for at least 48 hours before being considered on the Senate floor;
  
• require disclosure of earmarks, including the identity of the lawmaker seeking the earmark and the earmark's "essential government purpose;"
  
• require recipients of earmark funding to disclose the amount of money they spent on registered lobbyists to obtain the earmark;
  
• prohibit federal agencies from spending money on items and earmarks that are included only in conference reports; and
  
• strengthen Senate rules against the inclusion in conference reports of matters not considered by either the House or Senate. Current Senate rules allow a point of order against reports with new matter but many items get through when they are attached to "must pass" bills that can overcome the point of order.

Yesterday the Office of Management and Budget detailed its plan to terminate or reduce funding for 141 federal discretionary programs, saying that these cuts could free up to $14.7 billion in spending. The document, which also details Bush's plan to cut $71.1 billion from mandatory programs over five years, can be seen here.

If Congress were to adopt the White House's plan, the Department of Education would take the biggest hit, with 42 programs targeted to be terminted, for a savings of $3.5 billion. Additionally, 4 education programs would receive major cuts. Fortunately, many lawmakers are less-than-thrilled with the administration's plan. House Appropriations Committee Chairman Jerry Lewis (R-CA) said, "These proposals make a difficult appropriations season even harder. They allow the administration to artificially inflate programmatic priorities [and expectations] while at the same time touting a ‘fiscally conservative’ top line number."

Much has been made of the secret computer run published in the Washington Post yesterday that shows detailed and substantial program cuts over the next five years and the contrast between proposed increases for defense and military spending and cuts to pretty much every other domestic investment (read here, here, here, and here).

The computer run shows detailed White House projections over the next five years for spending in a variety of budget categories. This is usually information that is readily available in the budget, but has frequently been suppressed by this administration. the information shows drastic cuts to a variety of programs on the domestic discretionary side outside of defense.

This detailed information is important to have and should have been released with the budget. Yet the scope of the proposed cuts could be seen in the budget release on Monday - it just requires a bit of digging. We reported Monday in our analysis of the budget that by assuming some very conservative and probable increases to the defense and homeland security budgets over the next five years, all other discretionary programs would have to be cut by 16 percent by 2011 under the President's proposed budget caps. (It turns out the actual number is 13 percent, but you get the idea).

At first glance, this appears to be a guns vs. butter budget - proposing sacrificing domestic programs to pay for increases in military budgets because we cannot have both. Yet we can. As Bernard Wasow of the Century Foundation whimsically points out, the real problem with this budget is that it assumes "we must shoehorn size 7 spending needs into a size 5 revenue slipper." The real problem with this budget is that does not address the substantial and continuing gap between federal revenues and federal spending.

If too much focus is given to the specific proposed program cuts in the out-years of this budget and not to the fundamental structural imbalance in the federal government, those cuts are just the first of many, many to come.

The budget reconciliation bill passed by the House on February 1 was apparently different from the bill that was sent to President Bush for his signature. The discrepancy between the bills involves a provision that was intended to allow Medicare beneficiaries to purchase home-oxygen devices as opposed to paying endless rental fees. However, a clerical error made during the enrollment of the bill changed the policy to apply to practically all medical equipment. House and Senate aides are pointing fingers at each other for this change.

The GOP leadership is hoping to quickly change the language by moving the bill though both chambers under unanimous-consent agreements. Some Congressional Democrats, however, frustrated with the specifics of the bill (it cuts $40 billion from entitlement programs over five years) as well as with their sometimes-tense relationship with the majority, are wary of cooperating quietly. It is unclear right now whether voting will take place on the entire bill, or on a narrow part of the measure.

The Hill: Small Typo, Big Headache

An eye-opening article in today's Washington Post says that internal White House documents indicate that meeting the president's goal of cutting the deficit in half will involve a significant amount of cutting to domestic programs -- even to those supposedly "favored" by President Bush.

This years budget has several of these programs -- such as veterans health care and the National Institutes of Health -- slated for funding increases, however the stark reality is that these programs would actually be cut by the end of the decade. While the budget released by Bush to Congress only shows funding requests for domestic discretionary spending through 2007, a separate White House printout shows hidden cuts in appropriations in many education, health, and service programs that are slated to see slight increases this year. The Center on Budget and Policy Priorities has prepared an analysis of these hidden cuts, which can be found here. The White House document, detailing their five-year cutting plan for every non-defense discretionary program (again, this is not in the budget) can be seen here.

Washington Post: Years of Deep Cuts Needed to Meet Goal on Deficit, Data Show

Recently there have been some interesting op-eds on budget business in the Washington Post. Former CBO head Douglas Holtz-Eakin submitted an op-ed February 5 in which he discussed how increasingly booming entitlement programs need a "fundamental rethinking" that will dictate both the size of government as well as levels of taxation. E.J. Dionne, Jr. discusses in a February 7 column how "tax cutting is now the idol of the Republican shrine," and points out that sane budgeting will never happen unless deficit hawks work to turn popular opinion against this worship of tax cutting. Finally, Robert Samuelson, in a column today, takes a realistic look at receipts and outlays, and the choices that need to be made if we are ever going to achieve a balanced budget.

Overshadowed by the President's budget release, the Congressional Budget Office released its monthly budget review for December 2005 this past Monday. CBO estimates the federal government ran a deficit of $95 billion over the first four months of FY 2006. This is $15 billion less than the same period last year.

The two largest increases in spending over the first four months were in the Medicare program (11.9 percent - and that is mostly excluding spending on the new prescription drug benefit that will really kick in later this year) and in interest on the debt (23.5 percent). Interest on the debt was substantially higher due to fluxuations in short-term interest rates, higher inflation, and the growing deficit and continues to be the fastest growing category of spending across the federal government.

CBO Monthly Budget Review

President Bush's FY 2007 budget released on Monday allocated $441.3 billion for interest payments on the debt during fiscal year 2007. That's a huge 39 percent increase over the $318 billion spent four years ago and a 25 percent increase from the $352 billion spent last year. The president's allocation is a 11 percent increase over last year's request.

Interest payments on the debt will keep rising, and at an ever increasing rate, if the Bush administration keeps government running in the red. As recent estimates, and the president's own budget calculations show, continuation of current administration policies will do just that - particularly making Bush's first term tax cuts permanent.

Congress is already set to pass the forth increase to the debt limit in the last five years before mid-March - an exercise almost all Democrats and Republicans agree loathe. The new debt ceiling will be approximately $9 trillion.

This is simply unsustainable over the long run. When is this administration going to wake up and realize its policies have pushed the country into debt up to its eyeballs?

One of the more high profile budget cuts proposed by President Bush in his 2007 budget so far is a $53.5 million cut to the Corporation for Public Broadcasting (CPB), the largest cut President Bush has ever proposed.

Similar cuts have been proposed in year's past, but have not been enacted by Congress because of broad bipartisan support for public broadcasting. With the budget squeeze even tighter this year, it may be increasingly difficult to stave off the cuts. The 2007 proposal would be a 13 percent real cut in the CPB budget.

Reuters: Bush Seeks to Slash Public Broadcasting Funds

Our initial analysis of the president's budget release is now available. This is just preliminary and there are many more aspects of the budget to comment on. Check back here often for additional updates and information about what's in the FY 2007 budget proposal.

President Bush's budget proposal can be found online at the Office of Management and Budget. For a Washington Post article summarizing the budget, see the article "Bush's $2.8T Budget Proposal Cuts Domestic Programs."

The President's budget proposal -- expected to total $2.7 trillion -- is released today, and OMB Watch will have a preliminary statement completed later in the day. The President's budget will provide big increases in military spending and homeland security, but will do so by cutting many other domestic programs and trimming $36 billion from Medicare over the next five years.

A handful of programs are, however, marked for funding increases in the president's proposal. According to budget documents, the president will request $6 billion for the National Science Foundation for FY 2007 (an increase of 7.8 percent over FY 2006) and $4.1 billion for the science office at the Energy Department (an increase of 14 percent). Agencies like the Center for Disease Control and the National Cancer Institute, however, are slated for cuts. For more information on the President's budget, see these articles:

NY Times: Bush's Budget Plan, Shifting Priorities

Washington Post: Bush to Send Congress $2.7 Trillion Budget

Yesterday the Senate passed the tax reconciliation bill in a 66-31 vote. The bill passes $70 billion in tax cuts, and makes way for conference negotiations with the House. Lawmakers will be facing a difficult conference because of differences that exist between the House and Senate versions of the bill, particularly regarding the extension of the cut in tax rates on capital gains and dividends through 2010. The passage of this bill comes one day after Congress finished work on a $40 billion budget reconciliation bill which cuts entitlement spending in an effort to scale down the deficit. If this tax bill is passed by Congress, however, a net of $30 billion will be added to the deficit.

The major tax provision in this Senate bill blunts the effect of the alternative minimum tax. Democratic lawmakers made several attempts to attach amendments to the bill, but were largely unsuccessful. Sen. Kent Conrad (D-ND) made a noble but fruitless attempt to attach an amendment to offset the tax cuts.

CNN.com: Senate Passes $70 Billion Tax Bill

Washington Post: Senate Passes $70 Billion in Tax Cuts Over 5 Years

Tax Notes Commentary: First, Do No Harm

The White House has announce it will include an outline of approximately $140 billion in FY 2006 supplemental spending it is expected to request this year when it unveils its FY 2007 budget on Monday. The spending, which would go primarily to funding the ongoing wars in Iraq and Afghanistan (86%), will also include additional funds for relief efforts along the Gulf Coast.

The president's budget will show $70 billion in war funds to be spent in the current fiscal year that the administration hopes Congress will act on quickly. That would bring the total war spending in FY 2006 to around $120 billion. An additional $50 billion will be included in spending projections for FY 2007, which begins on October 1.

As we have said before, this administration's continued use of supplemental and emergency designations for war funding is very bad process. Such requests hurt the oversight role of Congress by bypassing the congressional hearing and markup process, thus reducing transparency.

The requests, since they are not included in regular budget proposals and cost estimates, have serious implications for the president's attempts to reduce the deficit. Essentially, the president is saying he will cut the deficit in half, but only counting part of the government, not the entire picture.

NY Times: $120 Billion More Is Sought For Military in War Zones

OMB Watch has written an analysis debunking some of the statements made by President Bush in the 2006 State of the Union address. Be sure to check it out.

A new analysis by the Aspen Institute finds that discretionary federal spending on programs of interest to nonprofits will fall by 2.8 percent between FY2005 and FY2006 (after adjusting for inflation). Programs of interest to nonprofits are expected to fall by $4.6 billion, while nonprofits themselves are estimated to see losses of roughly $1 billion.

These cuts are especially harmful because Bush's slicing and dicing of other discretinary programs has meant that nonprofits are shouldering an increasingly large part of the burden of meeting human needs. Additionally, they will most likely face even more cuts in this year's budget. The President's budget proposal is being released February 6.

During his State of the Union address Tuesday night, Presdient Bush proposed to increase clean energy research at the Department of Energy by 22 percent to research, among other things, "cutting-edge methods of producing ethanol."

The President certainly has a long way to go to reverse current trends. The New York Times reports today that:

The Energy Department will begin laying off researchers at the National Renewable Energy Laboratory in the next week or two because of cuts to its budget.

A veteran researcher said the staff had been told that the cuts would be concentrated among researchers in wind and biomass, which includes ethanol. Those are two of the technologies that Mr. Bush cited on Tuesday night as holding the promise to replace part of the nation's oil imports.

The budget for the laboratory, which is just west of Denver, was cut by nearly 15 percent, to $174 million from $202 million, requiring the layoff of about 40 staff members out of a total of 930, said a spokesman, George Douglas. The cut is for the fiscal year that began on Oct. 1.

NY Times: Bush's Goals on Energy Quickly Find Obstacles

Today the House held their long-awaited vote on the budget reconciliation bill. The vote, we knew, was going to be close. The final count was 216-214. Two Republican members did not vote. All Democratic House members voted no, except for Earl Blumenauer who was out of town. Thirteen Republicans broke with the leadership and voted against this bill, which makes very harmful cuts to Medicaid, child support enforcement, foster care, and student loans programs. The Republicans who voted against the bill were Gerlach (PA), Ney (OH), Johnson (IL), Jones (NC), Latourette (OH), Leach (IA), McHugh (NY), Paul (TX), Ramstad (MN), Simmons (CT), Sweeny (NY), Smith (NJ), and Wilson (NM). The Emergency Campaign for America's Proirities should be commended for their work in pressuring many of these moderate Republicans into switching their votes.

Interestingly, the vote to pass this bill -- which cuts significantly from both Medicaid and Medicare -- comes one day after Bush said in his State of the Union address:

"Our government has a responsibility to help provide health care for the poor and the elderly, and we are meeting that responsibility."

Our government is not meeting that responsibility. The bill just passed cuts almost $40 billion from entitlement spending over five years, with Medicaid and Medicare bearing 27 percent of the brunt of those cuts. Forty-five million Americans are already without health insurance. Despite the President's comments, there appears to be a glaring hole in the efforts on the part of this country's leadership in fufilling any sort of compassionate health care responsibilities.

Washington Post: Budget Cuts Pass By a Slim Margin

In his State of the Union address last night, the President asked Congress to make his 2001 and 2003 taxcuts permanent, and told the American people this would make the economy even stronger. In the very same speech he mentioned efforts to "stay on track to cut the deficit in half by 2009."

There is an obvious disconnect between these two statements. While the President attempts to "cut the deficit in half" by shaving bits and pieces from the already-meager pool of funding available for non-defense discretionary programs, he is advocating an action that will have a cost larger than most people can even wrap their heads around. Making the tax cuts permanent and extending alternative minimum tax relief would have the nation facing large and growing deficits every year for the next ten years. Total deficits, the Congressional Budget Office Estimates, would be between $3.5 and $4 trillion over that period, which hardly indicates that Bush will be cutting budget deficits in half any time soon.

Bush's assertion that he can cut the deficit in half while extending the 2001 and 2003 tax cuts simply does not add up. Last night he spoke of fiscal crisis and "unprecedented strains on the federal government." Those strains are not going to go away, nor will the government's need to spend on both discretionary and entitlement programs. Extending the tax cuts will only drive the country further into debt, and will do nothing to help cyclical budget deficits.

Last night President Bush delivered his annual State of the Union Address. Check back here later in the day for an analysis on the comments Bush made regarding taxes, the budget, and the economy last night.