A Fiscal Nightmare
Wall Street Journal ^ | Thursday, July 24, 2003 | AL HUNT
Thank God for Grover Norquist; most of his policy prescriptions are disastrous, but he's a congenital truth teller.
"My goal is to cut government in half," the high-powered conservative activist told the Nation magazine, "to get it down to the size where we can drown it in the bathtub."
What Grover preaches, George W. Bush practices; the difference is he won't tell us. The Bush fiscal blueprint -- highlighted by huge tax cuts chiefly going to the wealthiest Americans that have turned surpluses into red ink with no end in sight -- will force one of two alternatives: soaring deficits, accelerating when the baby boomers retire, or draconian cuts in entitlements or domestic spending programs for education, health care or law enforcement.
Just as the White House selectively stressed convenient intelligence to build political support for a war in Iraq, so has it manipulated and misrepresented a dismal record on the economy. The Bush political strategists figure these twin towers of duplicity can be finessed at least until after the president's reelection in fifteen months. And the budget shortfall creates political and policy problems for the Democrats; there simply isn't much money for new initiatives.
Sensible alternatives, such as presidential candidate Bob Graham's proposal this week to restore fiscal sanity by eliminating some of the scheduled tax cuts for the wealthiest Americans, are attacked as general tax increases; this would bring the top rates basically to where they were during the Clinton boom. Former House GOP leader Dick Armey, now co-chair of the inappropriately named Citizens for a Sound Economy, charges this would cause "economic stagnation." This is the same Dick Armey, hailed by the right as a former economics professor, who 10 years ago claimed the Clinton tax increases on the rich would be a "job killer." The reality: The unemployment rate dropped to 6% from 7.6% in the year after those tax hikes were enacted, and 25 million more private-sector jobs were added to the economy over the next seven years.
The administration and its political supporters engage in the same contortions, or distortions, when rationalizing how these huge surpluses turned into deficits of $455 billion this year and $475 billion next year. Initially, the president declared that during the campaign he had warned there would be budget shortfalls if there was a recession, war or national emergency and we got a "trifecta." Then the New Republic and NBC's Tim Russert revealed that was pure fiction, candidate Bush never said anything of the sort, although Democratic candidate Al Gore did.
Sometimes the blame is pinned on the "Clinton" recession, although the economic downturn didn't begin until after Bush took office. The one factor that the Bush crowd refuses to acknowledge is the effect of the big tax cuts. House Budget Chairman Jim Nussle last week declared, "tax cuts don't cause deficits."
But Congressional Budget Office figures show that tax cuts, enacted in the Bush administration, are a major cause of the $930 billion projected deficits over the next two years. These tax cuts will cost almost three times as much as the combined costs of Iraq and Afghanistan, including the occupation, and the added homeland security and antiterrorist measures. As these big tax cuts explode in subsequent years, they will further exacerbate the deficit.
The administration's future fiscal projections are as dubious as their explanations of how it happened. In the final year of a second Bush term, the White House forecasts a deficit of $226 billion. But that assumes the Alternative Minimum Tax, designed to catch rich people who evade taxes, will hit ten times more people, something no politician believes; that fix would add about $50 billion to the 2008 deficit. The Bush figures also understate defense expenditures and war reconstruction costs.
A much more realistic figure is the more-than-$400 billion shortfall for that year foreseen by Goldman Sachs, which then sees steadily climbing deficits in the five subsequent years. Two Goldman Sachs alumni are top White House economic adviser Stephen Friedman and budget director Josh Bolten.
An instructive exercise -- for everyone but the Bush political spin doctors -- is to take this Goldman-Sachs projected deficit and see what it would take to get to a balanced budget or even to the $226 billion the administration projects in 2008. If defense, homeland security, interest on the debt and any tax increases are taken off the table, which the Bush people insist they should be, the spending cuts would have to be truly humongous, according to reliable estimates worked out by Richard Kogan of the Center on Budget and Policy Priorities.
In 2008, there would be almost $2 trillion of other domestic spending, including entitlements, such as Social Security, Medicare and military retirement benefits. If the tact taken is an across-the-board cut -- the approach advocated now, on an infinitely smaller basis, by Bush fiscal apologist Jim Nussle -- this spending would have to be slashed by 20% to get a balanced budget. Surely if Medicare, for example, is reduced that much, experts say providers would refuse care for many beneficiaries. If the politically sensitive entitlements are excluded, the rest of discretionary domestic spending -- like education, housing, national parks, job training, Head Start, law enforcement and veterans' medical care -- would have to be cut by a stunning 85%.
To realistically get to the administration's own $226 billion figure would require a 9% across-the-board cut if entitlements are included and a 38% reduction if it's limited to discretionary domestic programs.
Take your pick: a fiscal train wreck or a social calamity.
A Fiscal Nightmare
A Fiscal Nightmare
This, from the WSJ, reprinted by the conservative FreeRepublic. Not impartial, but worth being aware of. Hm, wasn't it that conservative touchstone Ronald Reagan who coined the phrase "voodoo economics?"
The Boney King of Nowhere.
I believe it was George Bush (the elder) who coined the phrase "voodoo economics" talking about Reaganomics when he was competing with Reagan in the primaries (if I remember correctly). In my opinion Bush was wrong though.
Bush (the younger) did cut taxes but spending wise he has been expanding the scope of government, including the high likelyhood of adding one of the biggest entitlement programs to come along in ages with the medicare prescription health benefit."My goal is to cut government in half," the high-powered conservative activist told the Nation magazine, "to get it down to the size where we can drown it in the bathtub."
What Grover preaches, George W. Bush practices; the difference is he won't tell us...