Bush Budget Sees Bigger Deficits as Economy Slows

The budget makes military spending and the Iraq war its centerpiece, proposing a 7.5 percent increase for the Pentagon to $515 billion.

U.S. President George W. Bush acknowledged on Monday a weaker economy would lead to higher budget deficits, as he unveiled a $3.1 trillion spending plan for fiscal year 2009 that would nearly freeze domestic programs.

The budget makes military spending and the Iraq war its centerpiece, proposing a 7.5 percent increase for the Pentagon to $515 billion. On top of that Bush also sought $70 billion more for the conflicts in Iraq and Afghanistan.

In an outlook that Democrats said may even understate the extent of the fiscal woes, Bush forecast a deficit of $410 billion for the budget year 2008 that ends on Sept. 30 and $407 billion for fiscal 2009 that begins on Oct. 1.

Those deficits are more than double the $162 billion gap of 2007 and will approach the $413 billion all-time high for the deficit hit in 2004.

The grimmer budget situation will be inherited by the next president, who succeeds Bush in January 2009.

While many -- if not most -- of the priorities of the Bush budget will be jettisoned by the Democratic-led U.S. Congress, the unveiling of the document is sure to trigger a new round of sparring over Bush's fiscal policies and his economic legacy.

With the economy possibly teetering on the brink of a recession, revenues are expected to suffer, reversing a trend of the past three years in which annual deficits declined.

A promised $150 billion stimulus package of tax rebates will add to the deficit, at least in the short term, and funding for the Iraq war is another source of red ink.

"The primary reason for increasing deficits in the near term is the president's economic growth package and an expected slowing of receipt growth, due to an expected reduction in corporate tax receipts from recent high levels," said Bush's budget sent to Congress.

Some critics say the actual budget deficits could be even higher, noting that the economic predictions used to calculate the Bush budget are rosier than private-sector forecasts and that the spending plan includes only a portion of the expected funding needs for the Iraq war in 2009.

As details of the budget began to leak out over the weekend, Democrats hammered Bush for presiding over a shift to deficits after taking office amid budget surpluses.

"Today's budget bears all the hallmarks of the Bush legacy -- it leads to more deficits, more debt, more tax cuts, more cutbacks in critical services," said House Budget Committee Chairman John Spratt, a South Carolina Democrat.

In addition to freezing scores of programs, Bush proposed cutting some 22 percent of the funding for the program that helps poor families pay to heat their homes as well as reduces aid for Amtrak passenger rail service by almost 34 percent.