World and Nation

Bush’s Final Budget Hints at Tough Decisions to Come For His Successor

President Bush’s final budget, a $3-trillion plan offered on Monday that would continue his tax cuts and sharply reduce domestic spending, has little chance of surviving in a Democratic Congress. But the problems it lays out will survive and grow, presenting tough choices for the next administration.

How, for example, will the next president rein in the cost of retirement and health programs? What will he or she do about tax increases on Americans when Bush’s tax cuts expire at the end of 2010, or when the alternative minimum tax propels millions of taxpayers into higher brackets each year?

Beyond these familiar traps, how will a Republican president pay for further promised tax cuts or a Democratic president pay for sweeping health care reform without increasing the red ink left by Bush?

“Republicans and Democrats are in complete denial on these issues,” said Robert D. Reischauer, president of the Urban Institute and former director of the Congressional Budget Office. “But were they to face up to the long-run fiscal challenges, it would be a ticket to defeat. It’s not what voters want to hear.”

The presidential campaign does not exactly reverberate with proposals for dealing with these problems.

For the Democrats, Sens. Barack Obama of Illinois and Hillary Rodham Clinton of New York would find the money by letting taxes rise for the wealthiest Americans. But that step would not raise enough money to pay for the spending programs they propose.

On the Republican side, Sen. John McCain of Arizona and former Gov. Mitt Romney of Massachusetts would cut wasteful federal spending — McCain points to “earmarks” for “pork barrel” projects — but budget experts agree that there is not enough money to be had from that course of action, either.

Bush’s budget would cut earmarks by $18 billion, an amount certain to provoke outcries in Congress but so small as to be of only symbolic importance.

A presidential election year, of course, is rarely a time for politicians to propose outsized, unpleasant choices. But with the economy turning downward, there is even less appetite this year to wage ideological battles.

The deficit is expected to grow to at least $400 billion, or just under 3 percent of the gross domestic product, in Bush’s final year in office, and probably more than that because of the Iraq war. That level approaches previous deficit records and is considerably higher than what Bush had projected a few months ago. The largest federal budget deficit — $413 billion, or 3.6 percent of the overall economy — came in the 2004 fiscal year.

But a large part of the shortfall results from the normal decline in federal revenues when there is an economic downturn, along with the stimulus package that leaders of both parties support.