Bush Budget Proposes Tax Cuts, Record Deficits

President Bush sent his $2.23 trillion 2004 budget to Capitol Hill Monday morning, including a proposed 3 percent increase in NASA funding.

The president's budget projects a $307 billion deficit next year on top of this year's $304 billion shortfall. The deficits are the largest ever in hard dollars, but less in terms of percentages than the 1992 budget, which at $290 billion represented 4.7 percent of the overall budget.

Congress is likely to insist that the budget be increased.

At 2.8 percent, administration officials say this deficit, which should run to $1.08 trillion over the next five years, is manageable for a $10.5 trillion economy that is trying to stay out of recession.

"The budget for 2004 meets the challenges posed by three national priorities -- winning the war against terrorism, securing the homeland and generating long-term economic growth," Bush said in his budget message to Congress.

The budget does not include the cost of a possible war with Iraq or the $670 billion tax cut package Bush is proposing as an economic stimulus.

Democrats have attacked the tax cut plan, including the president's proposal to make permanent tax cuts that were set to expire in 2010, as a boon to the wealthy that won't do much to stimulate the economy. 

"The president is pursuing a policy that will dramatically increase our deficits, expand our debts and accelerate our economic decline," said Sen. Kent Conrad, the top Democrat on the Senate Budget Committee.

"Just as we face the prospect of war with Iraq, the president is asking us again for massive tax cuts we cannot afford," Conrad said.

The president blamed the deficits "on a recession and a war we did not choose." He said his budget would impose "spending discipline" through such efforts as reshaping the government's big health care programs along more conservative lines.

The president's budget proposes spending $400 billion over the next decade to reform Medicare, which provides health care to nearly 40 million elderly Americans, and to offer for the first time a Medicare drug benefit.

Bush also will seek to overhaul Medicaid, the joint federal-state program that provides health care to the poor, offering states $12.7 billion over the next seven years to implement reforms in the program.

Congress will be sure to spend months arguing over the budget for the new fiscal year, which begins Oct. 1. U.S. lawmakers have not even completed the fiscal year 2003 budget, already four months late and not expected to be finished for another week or so.

Nonetheless, the president is required by law to submit the new year's budget on the first Monday in February

Bush sent Congress a 5-inch stack of books, weighing 13 pounds, spelling out his proposal. The five separate documents, featuring a bright blue line drawing of the White House, included one extra book this year analyzing the efficiency of hundreds of federal programs, part of a Bush management initiative.

In the proposal, Bush provides a 4.2 percent increase in defense spending, not including money for war with Iraq.  Last year's budget provided an 11 percent increase for defense spending and was the only section of the budget that has been completed.

The $15.3 billion in increased defense spending represents half of the $30 billion the president is seeking in new money for the operation of all federal agencies.

The president also sets aside a large increase for the government's newest agency, the Department of Homeland Security, created just 10 days ago, which would see its spending rise to $23.9 billion in 2004, an increase of 8 percent over the amount expected to be spent this year.

Other favored initiatives in the president's budget include education for disabled students, aid to school districts serving large numbers of poor students, a global AIDS initiative, veterans health care and assistance for U.S. allies in the fight against terrorism.

Outside of the favored programs, hundreds of other government agencies would be forced to make do with increases of around 2 percent, essentially in line with expected inflation.

"One conclusion is inescapable: The federal government must restrain the growth in any spending not directly associated with the physical security of the nation," Bush's budget book states.

Bush Pushes NASA Increase

The president's spending plan envisions a $500 million increase in NASA's more than $15 billion budget. In the last budget, NASA's funding was cut by 1.9 percent.

The White House is defending NASA's basically flat budget, a problem that critics say may have compromised the safety of the shuttle program.

"The president is committed to moving forward in space. He has made that plain. His budget makes that plain," said Office of Management and Budget Director Mitch Daniels. "If there is a lesson in the last couple of days, I suppose it is another sad example that more money alone can't always avoid very sad setbacks."

Democratic Sen. Bill Nelson, D-Fla., said on Fox News Sunday that he didn't think safety was compromised because of a declining budget, though he has been pushing for more money for NASA.

"You just can not continue the safety upgrades if NASA is starved. Fortunately, I think the administrator of NASA is beginning to move money for the safety upgrades, and let me hasten to say that I don't believe that the delay on the safety upgrades caused anything on this catastrophic failure."

Fox News' Wendell Goler and the Associated Press contributed to this report.