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Last Updated: Monday, 7 February, 2005, 11:44 GMT
Bush to outline 'toughest' budget
President Bush
President Bush is looking to save money at home
President Bush is to send his toughest budget proposals to date to the US Congress, seeking large cuts in domestic spending to lower the deficit.

About 150 federal programmes could be cut or axed altogether as part of a $2.5 trillion (1.3 trillion) package aimed at curbing the giant US budget deficit.

Defence spending will rise, however, while the proposals exclude the cost of continuing military operations in Iraq.

Vice-President Dick Cheney said the

budget was the "tightest" so far.

Deficit crunch

At the heart of the administration's fifth budget, presented to Congress on Monday, is an austere package of domestic measures.

These would see discretionary spending rise below the projected level of inflation.

It is not something we have done with a meat axe
Vice-President Dick Cheney

Such belt-tightening is designed to tackle the massive budget deficit increases of President Bush's first term.

Mr Cheney admitted that the budget was the toughest of the Bush Presidency but argued it was "fair and responsible".

"It is not something we have done with a meat axe, nor are we suddenly turning our back on the most needy people in our society," he said.

The wars in Iraq and Afghanistan, increased expenditure on national security after 9/11 and the 2001 recession wiped out the budget surplus inherited by President Bush in 2001 and turned it into a record deficit.

The shortfall is projected to rise to $427bn in 2005.

Scaling back

Education, environmental protection and transport initiatives are set to be scaled back as a first step towards reducing the deficit to $230bn by 2009.

I am glad the President is coming over with a very austere budget
Senator John McCain

Most controversially, the government is seeking to cut the Medicaid budget, which provides health care to the nation's poorest, by $45bn and to reduce farm subsidies by $587m.

Spending on defence and homeland security is set to increase, although not by as much as originally planned.

President Bush's proposals would see the Pentagon's budget rise by $19bn to $419.3bn while homeland security would get an extra $2bn.

Iraq excluded

The budget does not include the cost of running military operations in Iraq and Afghanistan, for which the administration in expected to seek an extra $80bn from Congress later this year.

US troops in Iraq
The cost of military operations in Iraq is excluded from the budget

Also not featuring in the proposals is the cost of funding the administration's radical proposed overhaul of social security provision.

Some experts believe this could require borrowing of up to $4.5 trillion over a 20-year period.

Despite the Republicans holding a majority in both houses of Congress, the proposals will be fiercely contested over the next few months.

'Exploding costs'

John McCain, a Republican Senator, said he was pleased the administration was prepared to tackle the deficit.

"With the deficits that we are now running, I am glad the president is coming over with a very austere budget," he said.

However, Democratic Senator Kent Conrad said the proposals exposed the country to huge financial commitments beyond 2009.

"The cost of everything he [President Bush] advocates explodes," he said.

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