WASHINGTON — President George Bush’s proposed $2.57 trillion 2006 federal budget includes both gives and takes for the fashion and retail industries.

The spending plan has cuts, such as trimming $8 million from a program to open foreign markets to U.S. exports, but boosts funding to protect against terrorism, including $8.2 million for a cargo security plan used by retail and wholesale importers of apparel and textiles.

The blueprint, a 3.5 percent increase against projected 2005 federal spending, was sent to Congress Monday, where it will be subject to hearings and challenges.

Bush’s fiscal plan calls for federal belt-tightening, along with tax breaks such as the cost of health insurance for low-income families. The President renewed his call to make permanent tax cuts that Congress authorized during his first term in 2001, notably on individual tax rates that begin expiring this year. Bush renewed claims that his fiscal plan by 2010 would halve the ballooning federal deficit, expected to reach $427 billion by yearend.

“This is a tight budget,” said Rachelle Bernstein, vice president and international tax counsel with the National Retail Federation, noting there is less room for lawmakers to trade spending on one program for another.

The NRF backs the President’s call to make permanent his 2001 tax cuts, which they say eased the effects of recession that year. “Making them permanent will help to sustain a good level of economic growth,” Bernstein said,

The budget doesn’t include the estimated $100 billion annual cost of the war in Iraq, which is being financed through a separate appropriation. The administration’s 2006 proposal also excludes estimates of an overhaul of the Social Security system, a centerpiece of the President’s second-term agenda.

Mark Levinson, chief economist with the apparel and hospitality union UNITE HERE, criticized Bush’s budget for cutbacks in grants and other assistance to foreign countries to improve labor standards. The spending proposal calls for slashing $81 million from current spending to $12 million.

“It’s just an example of their contempt for international workers’ rights,” Levinson said. “This was one area where the U.S. could play a positive role.”

He also took exception to the budget’s call for scrutinizing union bookkeeping. The budget includes $5 million to hire 48 new auditors “to combat embezzlement of union funds,” citing one case in Wisconsin where a former union business manager stole funds.

This story first appeared in the February 8, 2005 issue of WWD. Subscribe Today.

“This is an attack on unions pure and simple,” Levinson said.

Julia Hughes, vice president of international trade with the U.S. Association of Importers of Textile & Apparel, applauded the President’s proposal to add $8.2 million to a cargo security program, the Customs-Trade Partnership Against Terrorism.

The program is largely funded by participating corporations. A spokesman for the Department of Homeland Security confirmed the government’s input is more than last year, but did not know by how much. Foreign cargo deemed secured by C-TPAT prescreening techniques is less likely to be inspected once it arrives in the U.S.

“More U.S. companies could sign up for C-TPAT and possibly foreign companies could become part of it and we would agree that is money well spent,” Hughes said.

Other items in Bush’s proposed 2006 budget related to the fashion industry include:

l An apparent reduction in funding for the Market Access & Compliance unit of the Commerce Department to $40 million from $48 million appropriated in fiscal 2005. This program is designed to tear down trade barriers in foreign countries for U.S. exporters and monitor trading partners for compliance with international agreements. However, a Commerce spokeswoman said the difference is not a cut and noted the MAC unit received about $8 million from the State Department’s USAID program for two business information groups last year and is expected to receive it in fiscal year 2006.

“The reduction in the budget request for the [International Labor Affairs Bureau] represents the elimination of Congressionally earmarked funds,’’ a labor department spokesman said. “These grants cover activities that can also be covered by broader international cooperation and assistance programs managed by the State Department and the Agency for International Development.”

  • Decreasing funding by $1 million to $47 million for the new Manufacturing & Services section at Commerce, which focuses on domestic and international issues affecting U.S. industrial competitiveness.
  • A $39 million request for the Office of the U.S. Trade Representative, which is negotiating bilateral free trade agreements with Thailand, five southern African nations, four Andean nations and Panama, as well as multilateral negotiations. Of the $39 million the President has requested, $33 million is earmarked for bilateral trade negotiations and $6 million is designated for World Trade Organization negotiations and cases.

  • Increasing funding by $1 million to $198 million for the Labor Department’s Wage & Hour Division, which canvasses garment contractors and other workplaces for federal wage and child labor violations.
  • Increasing civil monetary penalties for violations of labor laws enforced by the Labor Department. Penalties for death or serious injury of youths caused by child labor violations would increase from $11,000 to $50,000, and to $100,000 for repeat or willful violations.
  • Creation of user fees for Labor’s new Temporary Worker Program for employers who cannot first find American workers. As of the end of 2004, there was a backlog of more than 300,000 applications and employers waited up to six years for certification.

By Joanna Ramey and Kristi Ellis