January 31, 2008

Deficits Could Force Domestic Spending Freeze

UPDATED.

President Bush is seeking a freeze on nearly all domestic spending along with a plan to squeeze savings out of entitlement programs in his 2009 budget, AP reports.

Federal deficits are approaching the $400 billion mark this year, in part because of ongoing spending in the Iraq and Afghanistan wars, and in part because of a pending economic stimulus package, which is expected to cost around $150 billion and double this year's deficit.

When Bush presents his budget on Monday, he will call for $178 billion in savings from Medicare and $17 billion for Medicaid. Much of the Medicare savings would come from freezing reimbursement rates to health care providers for three years, according to AP.

The overall slowdown of the economy and an onslaught of negative economic indicators mean lower revenues this year, and the White House is expected to deliver a worse revenue prediction than a recent forecast from the nonpartisan Congressional Budget Office.

Bush's budget is not likely to be well received in Congress, this being an election year. As the ripple effects of the housing bust continue to be felt in households, the new deficit estimates put Republicans running for re-election at a real disadvantage.

Meanwhile, Senate Democrats appear ready to slash the price tag on their economic stimulus proposals. A stimulus package is expected on Bush's desk by Feb. 15.

Posted at 4:05 PM
Posted to: Bush Administration, Congress, Economy, Iraq, Middle East, President Bush, Taxes
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