Bush submits €2.3 trillion budget

US president George Bush sent a €2.3 trillion spending plan to Congress today, proposing a big increase in military spending, including billions more to fight the war in Iraq, while squeezing the rest of the US government to meet his goal of eliminating the deficit in five years.

Bush’s plan would make tax cuts passed during his first term of office permanent, at a cost of €1.2 trillion over 10 years. He is seeking €60.6bn in savings in the government’s big health care programmes – Medicare for the elderly and Medicaid for the poor – over the next five years.

Release of the budget in four massive volumes kicks off months of debate in which Democrats, now in control of both the House of Representatives and the Senate for the first time in Bush’s presidency, made clear they have significantly different views on spending and taxes.

“The president’s budget is filled with debt and deception, disconnected from reality and continues to move America in the wrong direction,” said Senate Budget committee chairman Kent Conrad, a Democrat.

The president insisted that he had made the right choices to keep the US secure from terrorist threats and the economy growing.

“My formula for a balanced budget reflects the priorities of our country at this moment in its history: protecting the homeland and fighting terrorism, keeping the economy strong with low taxes and keeping spending under control while making federal programmes more effective,” Bush said.

Just as Iraq has come to dominate Bush’s presidency, military spending was a major element in the president’s new spending request. Bush was seeking a Pentagon budget of €472bn for 2008, more than one-fifth of the total budget, up from €455bn in 2007.

For the first time, the Pentagon figures include what Bush wants to spend to fight the Iraq war, money that in past years was put in supplemental appropriations rather than the regular budget.

Bush projected a deficit in the current year of €185bn, just slightly lower than last year’s €188bn imbalance.

For 2008, the budget year that begins next October, Bush sees another slight decline in the deficit to €182bn with further steady improvement over the next three years until the budget records a surplus of €45.5bn in 2012, three years after Bush has left office.

Democrats, however, challenged those projections, contending that Bush only achieves a surplus by leaving out the billions of dollars Congress is expected to spend to keep the alternative minimum tax from ensnaring millions of middle-class taxpayers.

The tax was instituted as a formula to prevent the rich from avoiding taxes but it has never been adjusted for inflation so that each year it hits more and more middle income taxpayers.

Bush projects government spending in 2008 of €2.3 trillion, a 4.9% increase from the €2.1 trillion in outlays the administration is projecting for this year. However, the administration notes that the 2007 total is only an estimate, given that Congress is still working to complete a massive omnibus spending bill to cover most agencies for the rest of this fiscal year.