NCPA - National Center for Policy Analysis


February 8, 2005

The fiscal 2006 federal budget is being billed as the tightest yet by the Bush administration. But the administration's rhetoric does not match the budget substance, say Chris Edwards and Alan Reynolds, director of tax policy and senior fellow at the Cato Institute.

Overall spending is projected to rise 3.6 percent in 2006, but that follows an enormous 33 percent increase over the past four years. And tens of billions more will be needed for Iraq, say the economists.

  • At first glance the budget sounds pretty tough this year, with a promise to cut or terminate 150 federal programs.
  • But even if Congress passed all those cuts, 2006 spending would be reduced by less than 1 percent.
  • Last year's budget likewise proposed terminating 65 programs, but only five were actually ended.

To give some credit, the Bush budget does include real cuts in some areas, such as housing, transportation and the Corps of Engineers. The budget proposes that nondefense discretionary outlays rise by 2.4 percent in 2006, and then has spending falling later in the decade. But don't hold your breath for those out-year reductions, warn Edwards and Reynolds.

Congress should go beyond the administration's limited cuts by enacting an overall federal budget cap to force trade-offs between defense, entitlements and domestic discretionary spending, say the economists. And Congress needs to start moving major programs such as highway spending and the giant Medicaid back to the states. A first step would be to turn Medicaid into a block grant and slow spending to at least the inflation rate. The Bush budget includes some restraint on Medicaid spending, but block-granting the program would create savings of $55 billion annually by 2010 and $161 billion annually by 2015.

Source: Chris Edwards and Alan Reynolds (Cato Institute), "A Little Less Is Still a Lot," Wall Street Journal, February 8, 2005.

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