Living beyondour means

Congress should declare the Bush budget dead on arrival and start from scratch.

The annual budgeting process has become something of an exercise in denial under the leadership of President George W. Bush. In recent years, the administration has made a fine art of proposing federal budgets that have little in common with today’s fiscal realities.

The latest Bush budget, released last week, is a work of art that promises substantial deficit reduction but only delivers more red ink. That should set off alarm bells for anyone who values the fiscal health and economic prosperity of this country.

No one should doubt the importance of reducing the federal budget deficit. In an era of scarce resources and growing public needs, interest on the federal debt already consumes a good part of the budget each year – 7 percent, or $153 billion, in 2004. That money will be sorely missed in years to come as the country struggles to meet the retirement needs of the aging baby boomers.

A more-long-term concern is that the foreign banks and investors who currently finance much of U.S. deficit spending will begin to invest their money elsewhere. That would push interest rates higher and jeopardize economic growth. In a sign that the administration shares these concerns, the president promised to slash the current deficit of $427 billion in half during the next five years. But how that will happen is far from clear.

Two-thirds of the federal budget is eaten up by entitlement spending – programs such as Medicare and Social Security that can’t be cut without costly political consequences. Another chunk of the budget goes toward military spending, which Bush has proposed to increase by 5 percent next year. That leaves domestic discretionary programs for the environment, housing and scientific research squarely on the chopping block.

The Bush commitment to deficit reduction loses even more steam by simply omitting the projected costs of the war in Iraq and a partial privatization of Social Security.

But Congress could and should declare the Bush proposal dead on arrival and start from scratch, designing a budget that truly tackles the deficit. That might be a stinging rejection for a president fresh from re-election, but it would be a boon for the nation’s fiscal future.