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Politics : Attack Iraq? -- Ignore unavailable to you. Want to Upgrade?

To: calgal who wrote (7135)	7/21/2003 12:35:55 AM
From: calgal	Respond to of 8683

OUTSIDE THE BOX Out of Balance Bush's next challenge is to get spending under control. URL:http://www.opinionjournal.com/columnists/pdupont/?id=110003774 BY PETE DU PONT Monday, July 21, 2003 12:01 a.m. EDT The Bush administration announced last week that the budget deficit would be $455 billion this year, and even more in the next fiscal year. Budget Director Joshua Bolten argues that "a balanced budget is not a higher priority than winning the global war on terror, protecting the American homeland, or restoring economic growth and job creation." True, it isn't, but the current spending surge looks like the first step in a brisk walk towards a very steep fiscal cliff. Sometime in the summer of 2008, just five years from now, the total benefits paid out to Social Security and Medicare beneficiaries will exceed the payroll tax revenues paid in by workers. The difference, $390 million, will have to come from general income tax revenues. The $390 million amount is small--only 0.02% of federal income tax revenues--but the payment will be the dawn of a new era of fiscal difficulty. Instead of receiving surplus revenues from these two programs, Congress will begin sending income tax revenues to them. The money Congress will have to appropriate for the two programs will rapidly escalate--to 5% of income tax revenues ($100 billion) in 2013, 16% in 2020 and 35% in 2030. By 2050 half of all the money collected in federal income tax will be needed to pay Social Security and Medicare benefits. So income taxes will have to rise or other spending will have to fall by 50% to keep the budget in balance. That is what President Bush referred to in his budget presentation last winter as "the real fiscal danger." Add to that the $100 billion price tag of helping the 30 million middle-income taxpayers who will have been sucked into the alternative minimum tax and the accelerating increases in other federal spending, and 2008 looks like the beginning of a massive fiscal challenge. In its first two budget years the administration increased federal spending an inflation-adjusted 5.3% per year. To put that in perspective, the inflation adjusted annual spending growth rates for other administrations have been:Carter 4.2% Reagan, first term 3.5% Reagan, second term 1.8% George Bush 1.9% Clinton, first term 1.0% Clinton, sencond term 1.9% George W. Bush (first two years) 5.3% Some of that total spending is nondiscretionary and largely automatic, such as unemployment benefits, Social Security and Medicare. Some is for post-Sept. 11 national defense. But in the first three budgets of the Bush administration, nondefense discretionary spending will have increased an average of 5.8% per year, exceeding in just three years the total increase of such spending in all eight Clinton budgets. In other words, American government is on a domestic spending spree. Meanwhile, tax receipts are substantially down because of the sluggish economy. Total tax receipts were $2.025 trillion in 2000 but only $1.853 trillion in 2002, an 8% decrease. Personal income tax receipts were down 10%, corporate tax receipts down 31%, and capital gains revenues were down 51%. Only about a quarter of the revenue declines were the result of President Bush's tax cuts. What is to be done? First, stop the huge domestic spending increases; second, keep enacting growth-inducing tax reductions that will get the economy back on its feet so that revenues will rise.No modern government has ever taxed its way out of a recession; tax reductions to spur growth do that. JFK proved that; so did Ronald Reagan. Ask any governor of any state, or Art Laffer (who made famous the Laffer curve): Raising taxes may be necessary to pay the bills, but higher taxes hinder economic growth. President Bush understands that--better in 2003 than he did in 2001--and has acted to spur economic growth. But his administration has not grasped the full impact of the enormous increase in federal spending it has advocated. The $26 billion 2001 education program was costly, the unnecessary $85 billion farm bill hurt, and allowing government spending to increase more than 5% a year hurts a lot. The Bush team is now pushing a large Medicare drug benefit program that will hurt even more. Andrew Rettenmaier and Thomas Saving (a Social Security public trustee) estimated in a Wall Street Journal piece on June 24 that Mr. Bush's $400 billion benefit would likely produce a 12% Medicare cost increase by 2012 and that "the unfunded liability of such a reform is $7.5 trillion." (The Democratic plan, with a price tag of $900 billion, would be even worse.) These estimates may be far too optimistic. Bruce Bartlett points out that when Congress created Medicare in 1965, estimates were that it would cost $9 billion by 1990. In fact it cost $66 billion that year; the original estimate was off by a factor of seven. Apply that to the Rettenmaier-Savings $7.5 trillion estimate, and, well, it's a spending (and regulatory) burden of catastrophic proportions. So the largest domestic challenge facing the Bush administration in the next 5 1/2 years is limiting and controlling federal spending. The president cannot look to Congress for help, for it has a perpetual bipartisan bias towards spending. Nor can he count on economic growth to cover 5% annual spending increases. The president must bring the same kind of resolute belief he holds in eliminating terrorist threats against America to bear against higher federal spending. And there isn't much time; 2008 is just a few years away. Unless something is done that year, we'll see the beginning of the end of the fiscal policy America has followed for the last quarter century. Mr. du Pont, a former governor of Delaware, is policy chairman of the Dallas-based National Center for Policy Analysis. His column appears once a month.

To: calgal who wrote (7135)	7/21/2003 12:40:39 AM
From: tejek	Respond to of 8683

Political and press rhetoric in the current world, of course, is instead consumed by the revelation that intelligence analysts sifting ambiguous reports sometimes disagree. Desperate Democratic presidential candidates and the neurotic anti-Vietnam left take the intelligence controversy as the latest excuse for belittling the president's military victory. Serious people need to understand what this carping puts at risk. The right can go on playing this game that Bush's gaffes are much to do about nothing but the Iraqis are about to see how a democracy works; when a president spins his people into a war, how those people react when they find out they've been mislead. They'll learn more than if they took a full year of democracy 101. The right can belittle all they want but they are ignoring how vulnerable they and their president really are. BTW, daily, PM Blair is asked if he is resigning. Events in the UK seem to precede events in the US by 1-2 months.