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Bush's $2.57 Trillion Budget Would Slash Farm, BPA Subsidies by Charles Pope, Washington Correspondent Seattle Post-Intelligencer, February 8, 2005

WASHINGTON -- President Bush presented an austere $2.57 trillion budget yesterday that boosts spending on defense but little else, cutting or eliminating dozens of popular domestic programs, including subsidies that have kept Northwest power rates among the lowest in the nation.

The four-volume budget blueprint delivered to congressional leaders upheld White House promises to tightly rein in spending so that Bush could begin delivering on a campaign pledge to slice the deficit in half by 2009.

For the Northwest, the "tough love" approach toward budgeting will be apparent in ways both large and small. Bush's spending plan -- if adopted as written -- would cut crop subsidies to farmers and aid to low-income families. It would eliminate 150 programs, including 48 education programs and one that rids drugs from schools. It also eliminates all federal money for Amtrak.

The budget earmarks $200 million less for cleaning up the Hanford Nuclear Reservation, an amount that critics said would prevent the Energy Department from meeting contractually required deadlines. The total falls from $2 billion in 2005 to $1.8 billion next year.

For airline passengers, it would mean paying an extra $3 ticket tax to offset the cost of security. The fee would increase the cost from $2.50 to $5.50 for each leg of a round-trip ticket. Fees would increase from $5 to $8 for passengers making several stops on a one-way ticket.

Veterans would also feel the effect of Bush's budget. The document calls for vets to pay an annual $250 fee to qualify for VA health care. Those same vets would also pay more for their prescriptions, with the co-pay more than doubling to $15.

Senior members of Congress said the budget proposal contained few surprises, a tacit admission that Bush delivered a spending blueprint that calls for the deepest spending cuts in 25 years.

"We knew discretionary domestic spending would be hammered, and it was," said Rep. Norm Dicks, D-Wash., a senior member of the Appropriations Committee who plays a major role in shaping the budget each year.

The plan submitted by Bush yesterday is only the first step in a process that will stretch through much of the year. Congress must now take the president's recommendations and turn them into law.

It won't be easy. "It's going to be a tough year," Bush said. "This is going to be the year of the budget freeze. Some good programs will be hurt. But we have to get the deficit down."

But while lawmakers expressed concern about a number of proposals, Bush's proposal to end subsidies for the Bonneville Power Administration triggered the harshest response. The White House plan would set rates based on market prices rather than the actual cost of producing electricity, which in the Northwest is much lower than in the rest of the nation.

Besides the Portland-based BPA, which supplies power to four states in the Pacific Northwest, the plan also would affect three other regional agencies that supply power to dozens of states: the Colorado-based Western Area Power Administration; Georgia-based Southeastern Power Administration; and Oklahoma-based Southwestern Power.

"This is the same as a billion-dollar tax hike on Washington state, and as far as I'm concerned, it's dead on arrival," said Sen. Maria Cantwell, D-Wash. "To think we'd arbitrarily pay more for power generated right here in the Northwest is ludicrous. This is an outrageous attempt to fleece Northwest ratepayers, and I will not stand idly by while this administration attempts to dismantle BPA."

According to the administration's budget, Bonneville and other federally supported power-marketing administrations should "very gradually" be weaned from federal support with a goal of making electric rates closer to more expensive rates dictated by the market.

The budget estimates that such a move would save $3 billion during the next five years and $12 billion during the next 10.

It also would help reduce the deficit. "PMA rates are artificially low because taxpayers across the nation have borne some of the PMAs' costs. Thus, the general taxpayer has helped subsidize the cost of PMA power purchased by electricity wholesalers. Reducing subsidies to electricity wholesalers is consistent with the administration's fiscal policies, and this proposal will create a more level playing field for the nation's electricity suppliers and encourage appropriate energy conservation," the budget documents say.

The White House, however, declined to provide specifics, saying the plan would materialize in coming months as legislation. Analysts said such a move could increase rates from 3 cents per kilowatt-hour now paid by power companies who buy electricity from BPA to 5.8 cents or more.

Critics said the change would sharply increase power bills paid by businesses and residents. Though the increase would vary, analysts said they could range from a 35 percent increase to more than double current bills.

It also met with instant opposition from senior Western lawmakers, both Republican and Democrat.

In a hastily written letter to Bush, Cantwell and Sen. Patty Murray, D-Wash., promised a bare-knuckles fight.

The proposal to end subsidies, the senators wrote, "would upend the more than 50 years of law, policy and valued Northwest tradition that has made reliable, cost-based power the backbone of our regional economy and fabric of our rural communities. In short, your proposal is a non-starter, and we will use every tool at our disposal to prevent its implementation."

Sen. Pete Domenici, R-N.M., called it "politically untenable" and Dicks pointed out that similar attempts were made during the Reagan administration and in the 1980s but each "went down in flames."

The budget also came under immediate attack for what it omitted -- long-term estimates of the cost of fighting wars in Iraq and Afghanistan and the $2 trillion price tag for adding private investment accounts to Social Security.

"By not including in this budget expected costs for continued military operations in Iraq and Afghanistan, $2 trillion dollars in expected funds for Social Security reform or the costs of making permanent his first-term tax cuts, Bush is using smoke-and-mirror tactics in claiming that this budget is bare bones and fiscally responsible," Rep. Adam Smith, D-Wash., said. "This budget adds more than $4 trillion to the deficit over the next 10 years. As a matter of fact, the federal deficit is projected to reach a record $427 billion this year alone."

For all the worry, there were some positive signs. Most were connected to increases in defense spending and homeland security.

The budget outlines, for example, $310 million in military construction spending in Washington state. The bulk, $153 million, is to go to Fort Lewis for new barracks and a new special operations command.

The remainder will go to upgrades at the Navy's Bangor submarine base and its port in Everett.

Though not specific to a Washington state facility, the budget has $200 million for the Air Force to replace its aging aerial tanker fleet. Washington state lawmakers are lobbying the Pentagon to use Boeing aircraft for the job.

Yet even on defense spending, the news isn't all good. The Pentagon budget calls for reducing the number of F/A-22 advanced fighters from 381 to 179. Boeing is the main subcontractor to Lockheed Martin on the F/A-22 program, building the wings and aft-fuselage at its Developmental Center across from Boeing Field. It is also responsible for integration of the avionics.

About 1,400 people work on the Boeing part of the F/A-22 program, but that includes support personnel as well as those involved in manufacturing, according to Boeing.

The company said there should be no near-term effects from cuts in the number of fighters the Air Force will receive, but a spokesman declined to speculate about what could happen later.

Elsewhere, the budget calls for $568 million to restore Columbia Basin salmon. The figure includes $330 million in discretionary spending by Congress and $238 million from the Bonneville Power Administration. The spending proposed for fiscal year 2006 is part of a 10-year federal salmon plan projected to cost $6 billion during the next 10 years.

Even so, for every increase there are 10 -- or more -- programs that are targeted for cuts.

Bush would slow the growth of benefit programs by $137 billion over the next decade, nearly quadruple the savings he proposed a year ago with little success. Chief among the targets would be Medicaid, the federal-state health insurance program for the poor and disabled, but farmers' payments, student loans and veterans medical services were also on the chopping block.

Bush would give nine of the 15 Cabinet-level departments less money in 2006 than they are getting this year. Overall, he would cut non-security domestic spending -- excluding automatically paid benefits like Medicare -- by nearly 1 percent next year. Bush said it was the first such reduction proposed by the White House since President Reagan's days.

Forty-eight education programs would be eliminated. In all, more than 150 government-wide programs would be eliminated or slashed deeply, including Amtrak subsidies, oil and gas research and grants to communities hiring police officers.

The budget is also built on some assumptions that the White House is unlikely to realize. Among them is new revenue from oil and gas royalties from drilling in Alaska's Arctic National Wildlife Refuge, a long-term goal of the White House and congressional Republicans that has been repeatedly rejected by Congress.

BUDGET INS, OUTS

WHAT'S IN

• BPA: Power rates would be based on market prices, rather than the cost of producing power, resulting in undetermined higher rates for consumers and a government savings of $12 billion over 10 years.
• Hanford: $1.8 million for cleanup, $200 million less than current budget.
• Veterans: A new annual $250 fee required to qualify for VA health care. Co-pay for prescription drugs would more than double to $15.
• F/A-22: Reduces the number of F/A-22 advanced fighters from 381 to 179. Boeing is the main subcontractor to Lockheed Martin on the F/A-22 program.
• Military construction: $310 million in Washington state, with the bulk, $153 million, going to Fort Lewis.
• Salmon: $568 million to restore Columbia Basin salmon.

• Expected costs for continued military operations in Iraq and Afghanistan.
• Money for changes in the Social Security system.
• Costs of making first-term tax cuts permanent.