Bush prods Congress on spending priorities

President Bush told his audience of veterans, "I will not permit any course that leaves America undefended."

SAN ANTONIO, Texas (CNN) -- President George W. Bush defended his budget policies Wednesday, pressing Congress to fund his two top priorities -- defense and education -- in advance of other spending obligations as the yearly appropriations process heats up.

"We must start with things that matter most to the future and security of our country," Bush said in a speech before the American Legion's national convention, on the eve of his return to Washington after a lengthy vacation. "From this time forward, let us put education and national defense at the first of the line, not at the last."

The president's San Antonio speech marked his first public comments since the release of new congressional projections that show the government will need to use money from the Social Security surplus to pay for $9 billion in other government spending.

VIDEO CNN's Brooks Jackson takes an unusual look at the numbers game being played over Social Security (August 28) Play video (QuickTime, Real or Windows Media)   EXTRA INFORMATION How Social Security works     RESOURCES • Message Board: Taxing and spending: Bush budget   • White House Budget Report (pdf)   • Congressional Budget Office report (pdf)   Documents in PDF format require Adobe Acrobat Reader  for viewing.    What's in a 'surplus'? The U.S. figures its annual bottom line by including all tax revenues - including taxes that can only be used to pay Social Security benefits. If revenues fall short, the government has customarily borrowed from Social Security. Here's the math behind the Congressional Budget Office prediction: $153 billion = Total budget surplus $162 billion = Off-budget surpluses* $9 billion = Shortfall *Includes Social Security trust funds as well as the net cash flow of the Postal Service What's the impact? If Congressional Budget Office estimates are correct and the government needs to borrow from the Social Security trust fund, here are the effects of the move: Social Security benefits are not affected. Money taken out of the trust fund would be credited to the Social Security account. It could slow down the pace of paying off long-term debt.

The new numbers have sharpened the budget debate, with Democrats assigning blame for the plunging surplus on Bush's budgeting policies -- particularly his tax cut. The White House, which disputes that Social Security funds need to be used, has argued the tax cut will stimulate the feeble economy, and Congress should rein in its own spending.

The debate is likely to dominate discourse in Washington over the next several weeks, as Congress completes work on the federal government's 13 annual spending bills.

Some Democrats have said the encroachment on the Social Security surplus will make it difficult to pay for some of Bush's priorities. In particular, they have signaled that his proposal to increase defense spending by $18 billion next year may need to be cut if the Social Security trust fund is to be protected, as Bush and lawmakers in Congress have pledged.

Sen. Majority Leader Tom Daschle, D-South Dakota, and other Democratic leaders responded to Bush's speech Wednesday by sending him a letter "to convey our serious concerns about the deteriorating condition of the federal budget and the nation's economy."

They called on Bush to explain how the nation should pay for his defense, education and other initiatives in the wake of the tightening budget, and at the same time protect the Social Security and Medicare trust funds. "Although you continue to advance these proposals, your administration has failed to put forward any plan to reconcile these costs with the rapidly dwindling surplus," they wrote.

Bush shows resolve

In his Wednesday speech, Bush did not specifically refer to the new surplus numbers, but he indicated he would put up a fight against any move to scale back his proposals, especially on military spending.

"We recognize it's a dangerous world. I know this nation still has enemies, and we cannot expect them to be idle," he said. "That's why security is my first responsibility, and I will not permit any course that leaves America undefended."

He delivered his remarks to a receptive audience of armed service veterans, who greeted him warmly.

The president also touched on some of the other priorities he will pursue this fall. They include items left over from Bush's agenda before he left for his Texas getaway at the beginning of August -- his faith-based initiative to grant federal funds to religious organizations that provide charitable services; an HMO patients' bill of rights; and an education bill.

"I return to Washington tomorrow ready to make my case, and ready to work with folks on both sides of the aisle," Bush said.

Much work remains to be done on those priorities.

Bush's effort to allow federal funding for religious-based charities gained passage in the Republican-led House of Representatives in July, but has yet to be acted on by the more skeptical Democrat-controlled Senate.

Some lawmakers have objected to language in the proposal that would grant religious groups exemptions from state and local discrimination laws.

Both the House and Senate passed different versions of the patients' rights bill earlier this summer. Now, negotiators from both bodies must work out their differences in conference. That work is expected to begin soon after Congress returns from its August recess, next week.

The House patients' rights bill is backed by the White House and most Republicans, and has support from business and health insurance industry groups. It limits suits and caps damage awards. The Senate bill is mostly backed by Democrats and has support from trial lawyers, doctors and patients' groups. It provides broader rights for patients to sue health maintenance organizations.

Bush also challenged some critics who have been critical of late of his $1.35 trillion tax cut. Some Democrats have cited the dwindling surplus -- and the projection that funds will need to be taken from Social Security -- as confirmation of their position that the 10-year tax cut is too expensive.

"There are some who are second-guessing tax relief," Bush said. "You hear the voices beginning to filter out of their home states. I presume those who now oppose tax relief are for raising your taxes. That would tie an anchor on our economy. And I can assure you, I won't allow it."

Instead, Bush said, the tax cut is needed to help stimulate the nation's sputtering economy -- something all the more crucial in light of Wednesday's economic numbers showing anemic economic growth.