Bush has important battles to fight and limited political capital. 'Spending cuts' are a pretty effective club for Dems to bash a Republican president with, especially with media cooperation, and that bit of political theater keeps Republicans on the defensive.
There is more than one way to skin a cat. If Bush can transform some programs in a way that cuts Dems out of the loop, and makes people start to think about and appreciate autonomy, he may be planting a seed for later irrelevance of these programs. That's my theory anyway.
The most important thing is to win, that is what its all about. Now make some more changes and sell the ideas to the electorate.