Bush Plan Would Raise Deficit by $1.2 Trillion, Budget Office Says

WASHINGTON, March 3 — President Bush's budget would increase the federal deficit by $35 billion this year and by more than $1.2 trillion over the next decade, the Congressional Budget Office reported on Friday. The nonpartisan budget office said that Mr. Bush's tax-cutting proposals would cost about $1.7 trillion over the next 10 years and that his proposals to partly privatize Social Security would cost about $312 billion during that period. The office also said Mr. Bush's proposals to save money on Medicare, Medicaid and most nonmilitary programs would offset about one-third of the cost of his other proposals. The report comes as Republican leaders in Congress prepare to settle on their own budget for next year, which could differ substantially from Mr. Bush's. They are already running into political and economic obstacles as they try to extend Mr. Bush's tax cuts, pay for the war in Iraq and squeeze spending on antipoverty programs, education and most other areas of nonmilitary spending. Senate Republicans, nervous about their prospects in this fall's midterm elections, are balking at Mr. Bush's proposal to trim $36 billion over five years from Medicare, the government health program for the elderly. House and Senate leaders remain bogged down over a limited extension of Mr. Bush's tax cut for stock dividends, and Senate Republicans have repeatedly failed in efforts to permanently repeal the estate tax. At first blush, the Congressional Budget Office's report appears optimistic because it envisions that the budget deficit will slowly decline from $371 billion this year as economic growth generates more revenue and as Mr. Bush's budget cuts take effect. Measured as a share of the total economy, the budget deficit would decline to about 1 percent in 2011 from 2.8 percent this year. Though the government would still be borrowing money each year, the annual deficit would be low by historical standards. But the budget office noted that it had not included money for military costs in Iraq and Afghanistan after this year. The Bush administration has asked for a total of $92 billion in supplemental spending this year for those efforts. Mr. Bush's budget also omits any cost for preventing a huge expansion of the alternative minimum tax, a parallel income tax that is expected to engulf tens of millions of people over the next several years. Mr. Bush's budget assumes that the government will reap well over $1 trillion from the alternative minimum tax over the next decade, but Republicans and Democrats alike have vowed to prevent that from happening. The optimistic outlook also assumes that Congress freezes or cuts the vast majority of discretionary government programs outside of military and domestic security ones. Mr. Bush's 2007 budget would cut $2.1 billion next year from education, which had been one of the president's areas for increased spending. It would also cut money for community development block grants, low-income housing, child-support enforcement against deadbeat fathers and scores of other programs with support in Congress.

By EDMUND L. ANDREWS

New York Times