Near-Sighted Deficit Plan Ignores Problems Down the Road, Skeptics Say

WASHINGTON, Feb. 2 — In offering a plan to cut the federal deficit in half by 2009, President Bush ignored more than $1.5 trillion in tax cuts and spending commitments that come due shortly afterward.

Mr. Bush is projecting that the deficit will hit a record $521 billion this year, then decline to about $237 billion over the next five years.

But that estimate excludes most of the cost of making his tax cuts permanent, most of the costs of the Medicare prescription bill and all of the costs of keeping American troops in Iraq and Afghanistan beyond this year.

Budget analysts said Monday that the five-year goal would itself be difficult to achieve. The cost of maintaining American military forces in Iraq and Afghanistan could total $50 billion in 2005 alone, even if the number of troops there declines by one-third.

But by laying out a 5-year plan rather than a 10-year one, as Mr. Bush did until deficits began to soar, the administration has pushed many of the biggest fiscal challenges outside its budgetary "window."

All told, Mr. Bush has proposed more than $1.1 trillion in additional tax cuts over the next decade. The biggest proposal is a permanent extension of most of the tax cuts he has pushed through Congress in the last three years. Of that $1.1 trillion, only about $175 billion would occur between now and 2009. The rest, nearly $900 billion, would not take effect until the end of this decade — after the end of a second Bush term.

The five-year deficit-reduction goal also excludes soaring costs of paying for prescription drugs under the new Medicare law. The administration now estimates those costs will total more than $530 billion over 10 years, but two-thirds would come due in the second 5 years.

"If you look at fiscal policy, it looks like an exploding cigar," said Robert Bixby, director of the Concord Coalition, a bipartisan group that lobbies for greater budgetary discipline. "Focusing on just the next five years ignores all the exploding costs in the out years. It is much too narrow a focus."

Mr. Bush also refrained from addressing the looming issue of the alternative minimum tax. The minimum tax was designed to prevent wealthy taxpayers from taking excessive advantage of sophisticated tax shelters, but the tax is not adjusted for inflation and is expected to cause big tax increases for millions of moderate-income families if it is not changed.

On Monday, Mr. Bush ordered the Treasury Department to come up with ideas for reforming the minimum tax. The Congressional Budget Office has estimated that the cost of avoiding unwanted tax increases would be more than $400 billion over the next 10 years. Instead of dealing with that issue up front, the administration proposed a temporary fix that would last two more years and would cost only $23 billion.

Mr. Bush's short-term goal will not be easy to achieve in itself. The new budget assumes that discretionary spending outside of defense and domestic security will be almost frozen at current levels for the next five years. But conservative and liberal budget analysts said Monday that such assumptions were unrealistic. Mr. Bush has allowed discretionary spending to rise much faster than that in the last three years, and Congress will be pushing to do so again.

"They have a reasonable number in the first year, but then there are really low or no increases after that," said Chris Edwards, director of fiscal policy at the Cato Institute, a research group in Washington that favors reduced federal spending. "The problem is that Bush doesn't really have a plan for that happening. It's phony."

Conservative Republicans in Congress have become much more incensed about rising government spending in recent months, particularly after reluctantly supporting the expansion of Medicare. But fiscal conservatives complain that Mr. Bush has yet to veto a spending bill, while liberal critics complain that he continues to push for tax cuts.

William Gale, a budget analyst at the Brookings Institution, said Mr. Bush had implicitly made his deficit-reduction goal easier by projecting a surprisingly high budget deficit of $521 billion this year. Under the current budget plan, Mr. Bush can fulfill his deficit pledge even if the government has a shortfall of $237 billion in 2009. By contrast, the administration's budget plan last year proposed reducing the deficit to $190 billion by 2008.

Mr. Gale, of the Brookings Institution, said the administration could reduce the budget deficit by almost half over five years by doing nothing — no new spending increases and no additional tax cuts.

Even if Mr. Bush persuades Congress to freeze nondefense discretionary spending for the next five years, budget analysts say, that would have little impact on the line of deficits that lie ahead. Mandatory spending in the nation's three big entitlement programs — Medicaid, Medicare and Social Security — is expected to climb by $366 billion over the next five years.

Administration officials agree that the most difficult fiscal challenges by far have to do with long-term entitlement programs. Mr. Bush recently called for a partial privatization of Social Security that would allow people to divert some of their contributions to private investment accounts. But he did not propose any changes to rein in entitlement programs, and he supported expanding Medicare to pay some prescription drug costs for the elderly

"You have to ask yourself, where can they make changes that are sufficient to afford a reduction in deficits?" said Nigel Gault, the United States research director at DRI/Global Insight, a consulting firm in Lexington, Mass. "I don't see how you get the deficit down without raising somebody's taxes. I don't know whose taxes, but it's got to be somebody's."