Deficits drive Bush administration to seek unprecedented budget cuts

WASHINGTON - For years, government has been about singling out winners for favored treatment in spending and tax policy. That era is about to end - and the change could be painful.

The budget surpluses of 1998-2001 enabled Washington to make new funds available for favored causes such as homeland security, medical research and prescription drugs under Medicare. The government also slashed taxes for a variety of groups, including two-earner couples and the wealthy.

But now the surpluses have turned into record deficits. President Bush is not about to take back his tax cuts, but in setting spending levels in the budget he will deliver to Congress early in the new year, he will single out a loser - perhaps several - for every winner.

To Congress' deficit hawks, it's about time. "It sounds as if the White House is serious about it now," said Rep. Jeff Flake, R-Ariz. "We can only hope that's the case. It's going to take some presidential leadership, vetoing some bills."

Bush's budget writers have not made all their decisions, and those they have are closely held. But it is expected that, to help Bush keep his promise of cutting the deficit in half over five years, the budget will "maintain strict discipline," as the president said at a news conference last week.

Arguing that the costs are only vaguely known, budget writers also might decide not to include the outlays needed to cover the additional costs of the war in Iraq or the transition to proposed private Social Security accounts.

Interest groups know which programs are vulnerable to cuts -- and are circling the wagons around them.

Medicare and Medicaid are prominent on Bush's likely hit list.

Doctors who serve Medicare patients are threatened. Under current law, they will absorb a 5 percent reduction in their government reimbursement for treating Medicare beneficiaries as of Jan. 1, 2006.

Doctors barely headed off 4.5 percent cuts scheduled for 2004 and 2005 when Congress, in the bill establishing the Medicare prescription drug benefit, replaced those cuts with 1.5 percent increases.

Now they are trying again to defend their reimbursement rates. Dr. John C. Nelson, a Salt Lake City obstetrician-gynecologist who is president of the American Medical Association, said the AMA had met with members of Congress and Mark McClellan, the head of the Medicare program.

Nelson said Medicare's hospital benefits had remained untouched while doctors' reimbursements constantly were threatened. "The appearance is that the government is trying to solve Medicare's financial problems on the backs of the nation's doctors," he said.

The ultimate losers, he said, would be the elderly who are insured by Medicare. Before Congress reversed the cuts scheduled for 2004 and 2005, he said, a survey showed that 24 percent of family doctors would stop taking new Medicare patients if the cuts held up.

Arguing that budget cuts harm the general public, not just the immediate recipients of federal aid, is a common lobbying technique.

Medicaid supporters - the nation's governors and anti-poverty advocates - are using it in an effort to head off an expected proposal to scale back the federal share of the joint federal-state program of health insurance for the poor.

Ron Pollack, executive director of Families USA, said cuts were threatening Medicaid's ability to "rise to the occasion when the economy goes sour and more people lose their health insurance."

Some members of Congress expect Bush to try again to give states less Medicaid money but more flexibility to spend it, a bargain that the Senate blocked last year.

The National Governors Association says state budgets are under siege even without more federal Medicaid cuts. The association's chairman and vice chairman, Govs.

Mark Warner, D-Va., and Mike Huckabee, R-Ark., said last week in a letter to congressional leaders that it was "unacceptable in any deficit reduction strategy to simply shift federal costs to states, as Medicaid continues to impose severe strains on state budgets."