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OMB chief threatens vetoes before Dem budgets unveiled

House and Senate committees plan to mark up the fiscal 2009 budget resolution this week.

Office of Management and Budget Director Jim Nussle Monday sent what officials are billing as the first of its kind, a pre-emptive letter to the House and Senate Budget and Appropriations committees outlining veto threats over Democratic spending and tax policies -- before their budgets have been unveiled. The panels plan to mark up the fiscal 2009 budget resolution this week, which will provide spending and revenue targets for other committees to meet. Nussle's letter states that President Bush will veto fiscal 2009 appropriations bills that exceed his overall spending target and do not meet his mandate to cut the number and cost of earmarks in half from what was enacted for fiscal 2008.

Bush's 2001 and 2003 tax cuts do not expire until 2010, but Nussle reiterated the president will "veto any attempt to increase taxes." Democrats are under pressure because of pay/go rules to offset the cost of expanding the farm bill, preventing the alternative minimum tax from impacting more middle-income taxpayers and blocking a scheduled 10 percent cut in Medicare physician payments.

"Given the economic challenges our country faces, we need to keep taxes on families and job creators low, not increase the burden on those who fuel economic growth," he wrote. Nussle also called on Congress to approve Bush's proposals to curb entitlement programs, including Medicare, which is slated for $151 billion in five-year cuts, growing to $481 billion over 10 years, according to CBO. "The longer we put off a fix, the harder the fix will be," he wrote, adding that Democrats should use reconciliation procedures only to cut spending, not to offset new spending.

CBO released its preliminary scoring of Bush's $3 trillion fiscal 2009 budget, showing a decline in revenue of $777 billion over the next five years and $2.1 trillion over the next decade from what is assumed under current law. Bush's budget would make his tax cuts permanent. It only assumes a one-year patch for the AMT at a $55 billion cost; the full 10-year cost of annually increasing the AMT exemption is $646 billion, according to CBO. Leaving out the AMT -- which Democrats have proposed to pay for with a variety of revenue-raisers deemed unacceptable by Bush and Republicans -- anything approaching the $2 trillion in higher revenues assumed if Bush's 2001 and 2003 tax cuts were to expire will set the stage for GOP attacks.

According to CBO, Bush's budget assumes $1.1 trillion less in spending over the next decade than projected under current law -- assuming no more spending in Iraq and Afghanistan beyond fiscal 2009, cuts in domestic discretionary spending and Medicare reductions. Discretionary spending in Bush's budget, not counting another $70 billion for Iraq and Afghanistan, would total $997 billion. Most of that funding -- $538 billion -- would be for defense-related purposes. That is a 7.2 percent increase over the current year, while nondefense, non-homeland security spending would face a 0.5 percent cut.

Deficits are similar to OMB's earlier estimates, with the annual shortfall approaching $400 billion this year and next. The budget will be nearly in balance in fiscal 2012, with a slight decline the following year, according to CBO. OMB showed a slight surplus in those years when it released the budget last month.