It's Your Money. He Just Spends It

By Matthew Cooper; Massimo Calabresi

When George W. Bush submitted his whopping $2.57 trillion proposal to Congress last week, it showed how the war on terrorism has come home to roost. Both the Defense and Homeland Security departments get boosts, while many domestic programs for the poor, like vocational education and Medicaid, take a hit. Bush's aides portray him as Dr. No, turning down pleas from Cabinet Secretaries. But he's not standing in the way of two juicy repeals of taxes on the wealthy, scheduled to take effect next year. Here's a guide to the budget's winners and losers. --By Matthew Cooper and Massimo Calabresi

Most Surprising Winner

Despite his undiplomatic reputation overseas, Bush has never ignored foreign programs. This year he has jacked up the budget for the State Department and foreign aid 15.5% to $32.7 billion, boosting embassy construction as well as his global AIDS initiative. That gives his good friend, former National Security Adviser and new Secretary of State Condoleezza Rice, a full purse to play with in her new job.

Boldest Clinton Rollback

Community policing was one of the central tenets of Clintonism. Even in the face of heated opposition from local law enforcement, Bush aims to cut $635 million out of the Justice Department program, handing more money to the FBI and Homeland Security to pay for such things as modernized equipment for the Coast Guard and additional intelligence analysts and border patrols.

Biggest Loser: Medicaid

Bush has proposed a hefty cut to Medicaid, the federal program that spends $199 billion a year on health-care subsidies for those with little or no income. He claims he can shave off $60 billion over 10 years by closing loopholes in the fraud-ridden system, but independent analysts say the reduction is so large that states will be forced to cut medical benefits for the poor.

Sneakiest Tax Hike

To make consumers pay for a bigger share of airline security, Bush wants to raise taxes from $2.50 to $5.50 on one-way flights. But in the tortured jargon of budgets, this hike will be labeled a "fee." Whatever you call it, you can be sure that the ailing airline industry will fight hard to keep this from getting off the ground.

Riskiest Move

Long a target for budget hawks, farm subsidies are facing a 5% cut under Bush's plan. But farmers are a powerful constituency in the red states. Because the Senate, apportioned by states rather than population, is skewed toward rural interests, the President will face an uphill battle to put these sacred cows on a diet.

Toughest Sell

President Bush may want to slash operating subsidies for Amtrak. But with America's passenger rail service running through 46 states, plenty of members of Congress will work to stop him dead in his tracks.

Best Hidden Giveaway

An $8.3 billion windfall, buried deep in Vol. 2, lets managed-care companies continue to cherry-pick the healthiest Medicare patients, though these firms get paid as if they carry older and sicker ones. Healthier patients cost less, but this budget keeps the status quo instead of adjusting Medicare subsidies as planned.

Biggest Omissions

The president has vowed to cut the deficit in half by the end of his term, and his budget plan shows that happening. But getting there means leaving out some big-ticket items likely to come up

White House's deficit projection for 2010 -- 1.3% of DGP ($207 billion)

2010 projection, adding items not in the budget -- Operations in Iraq; war on terrorism/Alternative Minimum Tax reform/Social Security private accounts -- 2.4% ($385 billion)

Sources: Office of Management and Budget; Congressional Budget Office; Social Security Administration; Center for Budget and Policy Priorities