Bush budget to cut aid to Mich.

Gordon Trowbridge and Deb Price / Detroit News Washington Bureau

WASHINGTON -- President Bush proposed on Monday a $2.9 trillion budget with cuts to social programs that critics say could deepen Michigan's economic and budget crises.

Under the plan, which would cover the 12 months beginning Oct. 1, Michigan would be one of four states to get a cut in funding for Medicaid, the joint state-federal health program for the poor.

Cities in Michigan and other states also would get less money for economic development grants, the state would get less for home heating aid to the poor, and funding for education programs such as special education would shrink.

Bush's plan would eliminate a federal program that helps manufacturers develop new technology and cut another program that provides aid to small manufacturers.

The cuts in domestic programs are part of Bush's drive to increase military spending and make several tax cuts permanent while still balancing the federal budget by 2012. Democrats accused Bush of budget sleight-of-hand, claiming to put the nation on course to a balanced budget but failing to plan for future costs such as the Iraq war and tax law changes.

"The president has proposed things that just are not possible," said Leighton Ku, a health care analyst at the Center for Budget and Policy Priorities, a liberal think tank.

State officials upset

State officials reacted with alarm to the proposed Medicaid cut, which would add to an estimated $800 million to the state deficit.

"Instead of cutting Medicaid, the federal government should partner with states to expand access to affordable health care and increase savings in the Medicaid program," said Dan Beattie, director of Gov. Jennifer Granholm's Washington office.

Under Bush's plan, Michigan would get about $5.16 billion in 2008 Medicaid funding, $173 million less than it expected to receive this year. That's a 3 percent cut, the largest for any state. The Medicaid program will account for about one-third of all state spending in Michigan this year.

"These are phenomenal cuts," said Sara Rosenbaum, a Medicaid expert at George Washington University. "This is a terrible situation for any state, much less for one whose economy has suffered the way Michigan has."

Neither state nor federal officials could explain why Michigan's Medicaid program would face the nation's largest cut, and there was some confusion among the state's congressional delegation about whether a state-by-state breakdown showing the cut, provided by the White House Office of Management and Budget, was accurate.

The proposals are far from certain to pass. Democratic leaders were cool to many of the health care and other domestic cuts. The budget proposal is only the start of a debate that will result in congressional spending bills for the federal government.

Farmers would get help

The budget news for Michigan was not all bad, however.

The Agriculture Department had announced several proposals that could help the state's fruit and vegetable growers. And boosts in federal support for alternative-fuel production and research could help Michigan farmers and carmakers.

Automakers offered some praise, but hoped that Congress would improve on the budget. "The president's budget is a step in the right direction toward energy diversity, and we hope just the beginning of stronger support for advanced technology," said General Motors spokesman Greg Martin. The Energy Department also disclosed that it is proposing a $9 billion loan guarantee program, including $4 billion in loans that automakers could tap for research. But other proposals would slash aid to the state. Michigan cities would get about $100 million in Community Development Block Grants -- payments to cities for programs such as housing aid to the poor. That's a 28 percent cut from what Michigan cities received in 2006.

Michigan's funding for the Low-Income Home Energy Assistance Program, which helps the poor pay home heating bills, would drop to $80 million, down 26 percent from 2006.

Bush is seeking $481 billion for the Department of Defense in 2009, an 11 percent increase over this year.

That doesn't include an estimated $142 billion for the wars in Iraq and Afghanistan.

Detroit News Staff Writer David Shepardson contributed to this report. You can reach Gordon Trowbridge at (202) 662-8738 or gtrowbridge@detnews.com.