Red Ink May Last a Decade
“ How does he plan to pay for these and other proposals?
The answer in a nutshell is he doesn't. Not in the next few years. And,
according to a variety of analysts, likely not in the next decade. "It's
beginning to look like the 1960s when we tried to have both guns and
butter," said Robert E. Litan, economic studies director with the centrist
Brookings Institution in Washington. "The administration says, 'We're
going to cut elsewhere in the budget,' but I don't see any strong evidence
that's going to happen."
THE STATE OF THE UNION
Los Angeles Times
By PETER G. GOSSELIN, TIMES STAFF WRITER
WASHINGTON -- In his State of the Union speech Tuesday night,
President Bush declared that he wants to boost expenditures on
defense, homeland security, health care and education. . .and cut taxes
again to boot.
How does he plan to pay for these and other proposals?
The answer in a nutshell is he doesn't. Not in the next few years. And,
according to a variety of analysts, likely not in the next decade. "It's
beginning to look like the 1960s when we tried to have both guns and
butter," said Robert E. Litan, economic studies director with the centrist
Brookings Institution in Washington. "The administration says, 'We're
going to cut elsewhere in the budget,' but I don't see any strong evidence
that's going to happen."
Bush's position represents a substantial about-face for the president on
the subjects of balanced budgets and surpluses, one that analysts say is
only partly explained by the recession and the September terrorist
attacks.
Only a year ago, Bush and many other politicians relied heavily on a
projected 10-year, $5.6-trillion budget surplus to convince the nation it
could afford big tax cuts and expensive new programs such as a
prescription drug benefit for the elderly, and still eliminate the federal
debt.
But with the latest estimates showing a $4-trillion drop in the surplus,
senior administration officials have taken to ridiculing the very notion of
making 10-year estimates and have suggested there is little need for
Washington to run big surpluses.
"The fact is these numbers oscillate wildly and are of very, very little
use," Mitchell E. Daniels Jr., director of Bush's Office of Management
and Budget, told reporters last week.
Asked if the precipitous drop in the 10-year surplus estimate indicated
that part of last year's tax cut should be delayed or repealed, Daniels
wryly suggested that that would be necessary only "if large surpluses are
the very center of your universe; if they come ahead of fighting wars,
defending the homeland or putting people to work."
Social Security Could Be Tapped
In essence, analysts say Bush has made a two-pronged judgment about
the budget.
The first is that the attacks and voters' support for the war on terrorism
give him ample political cover for changing his stand on key budget
matters.
Only 12 months ago, for example, he was promising he would never
touch the portion of the surplus being amassed by Social Security in
anticipation of the baby boomers' retirement. Now the White House's
own deficit estimates show that the president is ready to spend that and
more for at least a few years.
Second, Bush appears to have concluded that only with deficits can he
pull off the political trick of winning both short-term support from key
congressional Democrats and the long-term backing of conservative
Republicans.
Several of the president's proposals Tuesday, especially those involving
expanded education spending and extended jobless benefits, appeared
specifically crafted to attract liberal lions such as Sen. Edward M.
Kennedy (D-Mass.).
Others, such as expanded national service, reminded listeners of the
kind of politically appealing but low-cost measure once favored by
former President Clinton--what budget veteran Robert D. Reischauer
described as "a big box with a small present inside where everybody
admires the wrapping."
But the presence of both kinds of proposals elicited barely a peep from
conservative analysts, such as Heritage Foundation economist Daniel
J.B. Mitchell.
"The president is not launching a big fight about the size of government," Mitchell said. "I wish he
would, but I understand why he's not."
Mitchell and other conservatives appear convinced that the return to deficits will serve the cause of
small government by eventually forcing the kind of spending cuts that even their idol, Ronald
Reagan, was unable to make.
White House officials from the president on down argue that the administration's new budget plan
will include serious spending cuts, including a $9-billion reduction in federal aid to state highway
programs that would be especially painful for California.
But analysts said that what little is already known about the president's plan demonstrates that these
cuts will be overwhelmed by such increases as boosting defense spending by $48 billion, doubling
homeland security expenditures and cutting taxes by an additional $90 billion this fiscal year and $54
billion next in order to rev up the economy.
"There will be budget cuts, but in the scheme of things they won't be the right scale to pay for the
new costs," said Richard Kogan, a veteran analyst at the liberal Center on Budget and Policy
Priorities.
The administration is scheduled to release on Monday its budget plan for the fiscal year that begins
Oct. 1. But it has already said that it will run deficits for several years and has estimated their size.
Kogan said it appears that Bush expects to spend an extra $85 billion over the current budget this
fiscal year and that his proposals for next fiscal year would cost an extra $66 billion. "If they were
cutting programs to offset the new costs, you wouldn't be getting these kinds of increases," Kogan
said.
Bush and White House officials such as Daniels have sought to portray the administration's dip into
deficits as a passing phase that will correct itself as the economy recovers and the nation absorbs
the new costs of securing itself against terrorists.
Red Ink Indefinite With Tax Cut
The budget director predicted that Washington will be back in the black by fiscal 2005. Daniel
Crippen, director of the Congressional Budget Office, said last week that the return of surpluses
could come a year earlier, in 2004.
But analysts said there are reasons to believe the end of deficits will be more fiction than fact.
In congressional testimony, Crippen said the budget will be able to be considered in the black in
2004 only if the Social Security surplus, which Bush vowed last year not to touch, is included in the
count. If the Social Security money is not counted, the budget won't achieve a surplus until the end
of the decade, and then just barely.
The surplus will not return to the size that it has run in recent years until 2011 and 2012, according
to the CBO estimates. And even then, that's only because the budget office assumes the 10-year,
$1.35-trillion tax cut Bush advocated and Congress approved last year "sunsets" and goes out of
existence. Bush last night called for making the tax cut permanent, which could extend the red ink
indefinitely.
latimes.com |
