Budget Battle Begins: President Proposes Cuts in Domestic Spending President Bush’s proposed 2007 budget would cut spending by most federal departments except Defense and Homeland Security. The budget totals nearly $2.8 trillion, a 2.3% increase over the current year. But it remains to be seen whether Congress is willing to cut or eliminate domestic programs in an election year. The nearly $440 billion defense budget represents a 7% increase year-over-year, but it does not include the expected costs of the war in Iraq and Afghanistan. A proposed 6% increase for the Department of Homeland Security, to $35 billion, would be partially funded by doubling the security fee for airline passengers, to $5 per trip. Among the programs targeted for cuts are those in the departments of Agriculture, Education, Health and Human Services, Housing and Urban Development and Transportation. (See separate story.) But many of the proposed cuts, such as a reduction in price supports for farmers, have been rejected by Congress in past years. The president also again asked Congress to make his package of tax cuts permanent. The White House forecasts a 2007 budget deficit of $354 billion, down from an anticipated $423 billion in the current year. Reaction to the budget generally fell along party lines. But even with Republican control of both houses, Congress added substantial amounts to the Bush budget proposal last year. Even the Republican chairman of the Senate Finance Committee, Charles Grassley (IA), expressed doubts about the president’s planned cuts in the growth of Medicaid and Medicare, warning that “any more reductions of a significant scope could be difficult this year.”