February 2, 2004

February 2, 2004 | WebMemo on Federal Budget

The President's 2005 Budget: A Summary

President Bush's 2005 budget proposal would restrict significant spending increases to a few targeted programs and freeze spending for most other programs. While the President's budget would eliminate some unnecessary programs, it is no sweeping reassessment of federal spending.

View a summary table of the President's 2005 budget proposal.

Key Figures

  • Mandatory spending would be nearly unchanged from the baseline increase of 4.3 percent.
  • On the discretionary side, Defense Department spending would increase by 7 percent, Department of Homeland Security spending would rise 4.4 percent, and other programs would collectively increase by 0.9 percent.
  • Some of the largest proposed increases for non-security discretionary programs include $1.5 billion more for the Millennium Challenge Corporation and approximately $1 billion apiece for global AIDS prevention, space flight, education for the disadvantaged, special education, and the State Department.
  • The President's budget excludes costs related to Iraq, and the Administration has indicated a supplemental spending bill may be offered during FY2005 to cover those costs.

Terminations

While most programs would see only slight increases or decreases in spending, the President's budget includes 65 proposed program terminations. While a start, these 65 programs averaged just $75 million each in the 2004 budget, and their termination would save only $4.9 billion. These terminations generally fall into three categories:

  1. Real program terminations such as Hope VI Revitalization of Severely Distressed Public Housing ($149 million in 2004), the Advanced Technology Program ($171 million), parts of COPS ($360 million), and other smaller programs;
  2. Termination of projects and earmarks funded by Congress for which the President had never requested funding, such as those in the Community Development Block Grant program and the Environmental Protection Agency; and
  3. Terminations where much of the actual funding is transferred to other programs, such as increased Justice Assistance funding balancing out terminations within State and Local Law Enforcement Assistance.

Halving the Deficit

As promised, the President's budget would cut the deficit in half by 2009. This would be accomplished by expanding discretionary spending by an average of 0.7 percent annually over the next five years and by assuming a more modest tax cut agenda, such as fixing the Alternative Minimum Tax only through 2006.

Realistically, though, halving the budget deficit will likely require real entitlement reforms in areas such as the 2002 farm bill and the 2003 Medicare drug bill. It is vital that any supplemental appropriations - such as those that will fund operations in Iraq and Afghanistan in 2005 - and any higher-than-expected entitlement costs be offset by larger reforms in both mandatory and discretionary programs. Closing down lower-priority agencies, consolidating duplicative programs, and privatizing poorly administered programs should be part of a sweeping reassessment of federal spending.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies