The 2007 US budget, to be released Monday, will attempt to shrink a deficit that could top A$534 billion this year by trimming A$48 billion from the Medicare health program for the elderly over the next five years and reducing or eliminating 141 programs, at a cost saving of A$19.3 billion dollars, adminstration and congressional sources told The Post.
The Congressional Budget Office appeared more optimistic about the government's red ink, forecasting a deficit of A$450.2 billion dollars for 2006, up from A$424.7 billion dollars in 2005. The CBO predicted the gap would shrink to A$360.6 billion dollars in 2007.
In his State of the Union address on Tuesday, President Bush broadly outlined his budget plans for the 2007 fiscal year that begins October 1, 2006.
"Every year of my presidency, we've reduced the growth of non-security discretionary spending. And last year you passed bills that cut this spending," Mr Bush told lawmakers.
"This year, my budget will cut it again and reduce or eliminate more than 140 programs that are performing poorly or not fulfilling essential priorities. By passing these reforms, we will save the American taxpayer another 14 billion dollars (A$18.6 billion) next year and stay on track to cut the deficit in half by 2009," Mr Bush said.
Reaching that target has become a rallying cry for the Bush administration.
On Friday, Mark Warshawsky, the Treasury assistant secretary for economic policy, also underscored the administration's drive to get the deficit "below two percent (of gross domestic product) in 2009" down from the 2.6 percent expected in 2006. "We're very serious about that," he told reporters.
The government has explained the expected increase in the deficit for fiscal 2006, noting that it had faced unforeseen major outlays for emergency assistance and reconstruction in areas devastated by hurricanes late last year.
But some critics doubt the outlook will be better in future fiscal years as the CBO has forecast.
Adminstration critics slammed the budget for a focus that "puts special interests first and people's interests last" according to Democratic US Senator Ted Kennedy.
"The gap between the president's words and deeds has grown by leaps and bounds each year as he fails to live up to to his promises, instead leaving ordinary Americans behind," said Kennedy.
"Sadly, it appears that the president's budget will offer gimmicks, rather than solutions" on social questions like health care and education said Senator Kennedy.
Experts at the Cato Institute, a libertarian think tank, see the A$18.6 billion in savings Mr Bush announced as inadequate if the administration is serious about putting a dent in a A$534 billion deficit.
Defence and health care spending are expected to continue to require vast outlays.
The government said Thursday it would seek A$93.4 billion in emergency funds for further military operations in Iraq this year from lawmakers and an additional A$66.7 billion for operations in Iraq and Afghanistan would be included in its 2007 budget proposal to Congress.
"The retirement of the baby-boom generation will put unprecedented strains on the federal government. By 2030, spending for Social Security, Medicare and Medicaid alone will be almost 60 percent of the entire federal budget," Mr Bush said.
"And that will present future congresses with impossible choices: staggering tax increases, immense deficits or deep cuts in every category of spending."
Analysts at the Brookings Institution agreed. "Dealing with these problems will require spending cuts or tax increases that are far beyond the scale of anything currently considered politically palatable," Alan Auerbach, William Gale, and Peter Orszag warned in a report.