Debate Expected Over Defense Budget

For many Americans, the end of the year is the time to review their budgets and vow to get better control over their finances. Congress and President Bush are also wrestling with better ways to manage federal budgeting and spending in the next fiscal year, but they're not necessarily on the same page.

Bush said in his end-of-year news conference earlier this week that some programs will feel the pinch when he submits his 2006 fiscal year budget. Sources have indicated that Bush is leaning toward freezing about a fifth of the government's spending.

Conservative economists say they are delighted by the news.

"It would be a very powerful signal to Wall Street for the president to call for a spending freeze, but frankly it's also just good policy, and it leads to the things that Congress needs to do," said Tim Kane of the Heritage Foundation (search).

Experts say unemployment benefits are likely to be scaled back, Pell Grant (search) money will be shared by a larger pool of college students, medical and agricultural research subsidies will be harder to come by and energy assistance (search) for low-income households will almost certainly not match the spike in energy costs.

The president has promised to cut the deficit in half by the time he leaves office, a promise he made not only to Americans but to European officials who say America's red ink lowers the value of the dollar and cuts into their exports.

Even though last year's $412 billion deficit was a record, it was $110 billion less than the original White House projections. Bush's White House budget director Josh Bolten (search) is quoted as saying that the president will "declare victory" with a 2009 deficit in the range of $275 billion.

But Democrats say they don't think that's cutting the real deficit in half, and Bush is trying to sidestep the job by funding the war in Iraq with emergency spending requests.

"We think that part of the motivation is that if it were there, the bottom line of the budget would look worse," said Rep. John Spratt (search), D-S.C., ranking Democrat on the House Budget Committee.

This week, Spratt and three of his colleagues in the House and Senate sent the president a letter saying no budget estimate is realistic if it omits the costs in Iraq and Afghanistan.

The White House said war funding is always done by emergency supplementals (search) to give the military as much time as possible to decide what it needs. It added that next year's request, expected to be more than $80 billion, will be counted against the budget deficit.

Spratt said while Congress debates the requests, the Pentagon often runs short in combat accounts.

"They have to borrow, usually from the operations and maintenance accounts. And when they do that, they defer training, they defer maintenance," he said.

The president has put a $25 billion marker in this year's budget to make sure the military doesn't run short. His aides said they don't expect next month's supplemental-bill debate to launch the kind of battle fought over the $87 billion emergency bill last year. They did acknowledge that they were somewhat concerned that the cost of the war will be fresh in people's minds when the tough spending plan is released just a few weeks later in Feburary.

Click in the box near the top of the story to watch a report by FOX News' Wendell Goler.