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The President of the United States of America, George W. Bush, has submitted a budget plan for the consideration of Congress that features cuts in entitlement programmes such as Medicare and education.

The budget, amounting to 2.77 trillion dollars, covers the 2007 fiscal year and includes huge increases in the military budget and aims to make permanent the tax cuts from President Bush's first term in office. It is in line with the statement made in his recent State of the Union address, and marks a stark statement that the so "“ called "war on terror" must be funded through cuts in other programmes.

The Budget Increases

The budget will see an increase of 4.8 % in military expenditure, reaching a record level of 493.3 billion dollars. The overall spending of the Defence Department would rise by 6.9 %, with a rise in the Army's budget from 99 to 112 billion dollars. Special Forces will increase by 15 % and the base level of pay for the military will be enhanced by 2.2 %.

This does not include all of the funds to be allocated for the actions in Iraq and Afghanistan, with the administration to ask for an extra 79 billion dollars on top of the 50 billion approved by Congress last December. Further domestic security growth will see the Department for Homeland Security receive a 9.8 % funding rise which will include greater funding for the Federal Emergency Management Agency (FEMA) and the provision of funds for a further 1,500 new border patrol agents.

Social Cuts

The areas to be cut, unsurprisingly, are health, welfare, pension allocation and education. Projected spending cuts over the next five years would amount to 65 billion dollars, with 36 billion dollars to be slashed from Medicare. Reductions in other entitlement, or nondiscretionary, spending include close to 5 billion dollars in farm commodity programs and 16.7 billion dollars from the Pension Benefit Guaranty Corp., the federal program backing private pensions.

A full third of the cutbacks in the 141 discretionary programmes to be slashed will fall within education. Overall education spending will fall by 3.4 %, with cutbacks in areas such as programmes supporting the arts, vocational training, and the elimination of a programme providing college preparation for poor students. Furthermore, a programme combating violence against women would also be cut.

In keeping with the Republican tradition of cutting taxes, the proposal looks to achieve a reduction of Government revenues of approximately 1.4 trillion dollars through making permanent earlier tax cuts. This does not appear to be a long "“ term spending solution however; the best "“ case scenario from White House estimates states that there will be a federal budget deficit of 423 billion dollars should this proposal pass through Congress. With emerging nations providing a skills challenge and an industrial market challenge to all supposedly "developed" nations, cutting education programmes would appear to be short sighted, and surely heralds skills deficits in the years ahead for the world's leading economy.

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Jethro Marsh

A necessary cut, or cutting the legs away from the USA's future economic success? Tell us in the FE Blog

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