The deficit deceit
By Scot Lehigh /
Boston Globe Columnist
February 7, 2006
IF GEORGE W. BUSH had been candid when he stood in the House chamber last week to report to the nation, here's one thing he would have said: ''My fellow Americans, we are steadily squandering our children's future."
Certainly that would have been more accurate than the president's suggestion that his administration was on track to halve the federal budget deficit by 2009.
Although they favor very different remedies, a remarkable consensus exists among fiscal experts, regardless of where they fall on the ideological spectrum, about the magnitude of our budgetary problems.
''I just came from a panel with [former OMB director] Alice Rivlin of Brookings and Bob Bixby from the Concord Coalition, and we couldn't stop agreeing on the long-term budget danger," Brian Riedl, chief budget analyst at the conservative Heritage Foundation, said on Friday. ''We may disagree on the solution, but among economists and think tanks, there is not much disagreement that the budget deficits within the next five, 10, or 20 years will reach levels that are practically unheard of."
Heritage predicts the yearly deficit will hit $394 billion in 2006, $458 billion in 2010, and $805 billion in 2015. One measure of the magnitude: Closing a gap of $805 billion would require a tax increase of $6,500 on every American family, says Riedl.
But what of the Bush administration's claim that the deficit will be steadily reduced in the next few years?
''It's baloney," says Chris Edwards, director of tax policy studies at the small-government-favoring Cato Institute, who notes that the minor savings Bush and his budgeteers are talking about are ''a joke in a $2.7 trillion budget."
The view is much the same at the Concord Coalition, the nonpartisan budgetary watchdog.
In its own recent budget projections, the Concord Coalition presents two scenarios, using politically realistic assumptions about spending and presupposing that the Alternative Minimum Tax -- originally passed to ensure upper earners couldn't escape at least some tax payment -- is indexed to inflation to keep it from hitting middle-class filers.
Even if the Bush tax cuts are allowed to expire, the 10-year federal fiscal shortfall would still hit $3.1 trillion, the coalition projects. And if those tax cuts are extended, as the president wants, the 10-year tide of red ink rises to an astounding $5.3 trillion.
Using similar assumptions, fiscal experts William Gale and Peter Orszag of the liberal Brookings Institution and Berkeley professor Alan Auerbach see a 10-year gap of $4.8 trillion.
True to its conservative tenets, Heritage asserts that the revenue side, despite the Bush tax cuts, is not really the problem. Between 2004 and 2006, Riedl projects, revenues will rise by $420 billion; on a percentage basis, he says, that is the largest two-year surge since 1976-1978.
And yet, any solution that excludes higher taxes sidesteps this reality: Despite an economy now healthy enough to be the object of administration boasts, a Republican president and a GOP-led Congress have been unable to hold federal spending anywhere near what current revenues will support.
That truth reinforces Gale's conclusion: ''Any sensible and viable resolution is going to have to involve tax increases as well as spending cuts."
Republican policy has been the opposite. They've reduced taxes while spending at levels that would have brought howls of GOP outrage had, say, Bill Clinton proposed them. Nominal federal spending went up 33 percent during Bush's first term, compared with 32 percent during Clinton's two terms, notes Riedl.
Granted, we've been paying for expensive military operations in Afghanistan and Iraq, but even when those are factored out, he says, ''this has been a record spending spree."
Politically, that no-pain prescription has given the GOP the benefits of tax cuts without the backlash from the deep budget cuts it would take to offset them.
That improvident path has been possible, of course, only through massive federal borrowing. But as conservative economist Milton Friedman has observed, if a long-term tax cut isn't offset by spending reductions, it isn't a tax cut at all, but rather simply a deferred tax increase on future taxpayers, who must repay the borrowing.
Or, as Bixby, executive director at the Concord Coalition, puts it: ''Tax cuts eventually have to be financed, and the way they are financing them is to send the bills to the future."
The rhetoric of restraint notwithstanding, that's this administration's real policy.
It's something that should outrage voters regardless of their party affiliation.
concordcoalition.org |
