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Bush reagan revolution { February 4 2003 }

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In 2003, It's Reagan Revolution Redux
Embracing Big Tax Cuts and Deficits, Bush Moves Away From Compassionate Conservatism

By Jonathan Weisman
Washington Post Staff Writer
Tuesday, February 4, 2003; Page A06

With his budget blueprint for 2004, President Bush appears to have stepped back from his "compassionate conservatism" agenda and picked up the fallen standard of the Reagan Revolution.

In the face of burgeoning budget deficits, the president has proposed new tax cuts that would cost the Treasury nearly $1.5 trillion over 10 years, on top of the $1.35 trillion tax cut passed in 2001. The tax cuts' potential impact on government enterprises has caught many supporters and detractors by surprise.

If enacted, they would end for the vast majority of Americans the taxation of inheritances and eliminate taxes on interest, capital gains and dividends. Those are tax changes Ronald Reagan could only dream of.

On the spending side, the president would hold most domestic spending outside the military and homeland defense at or below inflation levels. Programs for rural development, family literacy, vocational education, environmental protection and public housing revitalization would be cut from levels the White House proposed last year.

New controls would be placed on poverty programs, such as the earned income tax credit, school lunch subsidies and Medicaid, to ensure that billions of dollars in subsidies do not go to people not entitled to them. Two huge entitlement programs -- Medicare and Medicaid -- would be in for changes that would push millions of senior citizens into private-sector managed health plans while giving states far more control over their own health care spending.

"I am absolutely delighted he is doing so much more than people had any right to expect," said Dan Mitchell, a tax analyst at the conservative Heritage Foundation. "I'm almost to the point where I might smile."

The words "ambitious" and "bold" -- even "radical" -- rolled off the tongues of supporters yesterday as they digested the five-inch stack of books that make up the 2004 budget request. Detractors chose another word: "hubris."

Rep. John Spratt (S.C.), the ranking Democrat on the House Budget Committee, declared Bush's request "the most fiscally damaging budget in U.S. history." Fellow critics focused largely on the size of the tax cuts and the changes that Bush has proposed for entitlement programs, especially Medicaid, which eventually would be converted into block grants to the states.

"He's different from Reagan in two ways that are clearly worse," said Richard Kogan, a longtime federal budget analyst, now at the liberal Center for Budget and Policy Analysis. "Number one, after Reagan got through his first round of tax cuts, he was willing to scale back, where Bush is hell-bent on enacting as many and as large tax cuts as is possible before the tide turns against him. And number two, Reagan never proposed doing to Medicaid what Bush is doing."

Even some Republicans were amazed at the president's ambitions for a single budget plan -- and the eye-popping deficits it is expected to create.

If Bush wins his entire agenda, the White House expects a $304 billion deficit in 2003, rising to $307 billion in 2004. After shrinking to $178 billion in 2007, the deficit would begin to climb again in 2008, the last year of deficits the White House tried to project. Only after 2008 do the costs of the president's Medicare proposal and many of his tax cuts begin to appear.

"There are a lot of pretty radical ideas in here," said Rudy Penner, a former Republican director of the Congressional Budget Office. "I guess overall I would have preferred a few less bold initiatives to avoid the bold increases in the deficit."

To be sure, the budget does stick to many of the promises that Bush tied to his compassionate conservatism initiative. His five-year, $15 billion plan to combat AIDS in Africa and the Caribbean is supplemented by a $200 million request for international famine relief. Title I funding for needy public schools would go up by $1 billion -- or 9 percent. Bush's $200 million in drug treatment vouchers, which could be used at "faith-based" anti-drug programs, fits nicely with his pledge to help the neediest Americans through creative new government financing schemes.

White House spokesman Ari Fleischer blanched at the comparison between Bush and Reagan. He noted that much of Bush's compassionate agenda does not involve large amounts of money that grab attention in a $2.2 trillion budget.

"The biggest difference is that President Bush has always emphasized there is a role for government," Fleischer said. "President Reagan used to emphasize that government made things worse, and there are alternatives to government. It's a question of emphasis and belief."

But in ways large and small, this is an administration agenda that has changed since the 2000 presidential campaign and the attacks of Sept. 11, 2001. When he came to office, Bush proposed a package of charitable-giving tax cuts that would cost $90 billion over 10 years. In the 2004 budget, huge new tax-reduction programs are proposed that would represent a windfall for the wealthy, but the charitable-giving component has been whittled to $20 billion. Fleischer said that reflects compromises worked out with House Republicans.

The administration requested $1.3 billion for its newly created Millennium Challenge Account, an international aid program for developing countries. But that is at least $300 million less than administration officials had promised.

While the Department of Education's budget would increase by $1.7 billion (3.4 percent), after-school programs, teacher training, and education technology projects would be cut. Democrats say the president is shortchanging his own signature "No Child Left Behind" program. The Environmental Protection Agency's clean-water fund would fall to $850 million, down from $1.2 billion expected for 2003 and $1.4 billion in 2002.

Perhaps most strikingly, the administration is imposing stringent new controls over some of the most popular programs for the poor, to stop what the budget documents call "erroneous payments." Under the plan, families applying for free or reduced-price school lunches would have to submit more paperwork, including welfare records and wage data.

The Bush plan also calls for the Internal Revenue Service to begin pre-certifying low-income working families that want to claim the earned income tax credit. The EITC -- which is "refundable," meaning that if the credit is worth more than what a taxpayer owes, the extra is paid to the taxpayer in cash -- is the government's main assistance program for low-income working families.

Staff writers Albert Crenshaw and Dana Milbank contributed to this report.

2003 The Washington Post Company

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