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Impeach George Bush
Budget
I've decided to cut our household budget in half. Here's how I'm going to do it - Stop paying my bills!
Source: NY & LA Times, 2005-02-07
Candidate: Big Government
That's the level of discourse coming out of the White House today. And nothing short of it.
The Budget submitted to Congress by the Bush Administration reads like it was written by a class of first graders - who'd been left behind.
After giving it much thought, the President apparently decided NOT dealing with the realities of life is his best option. Then, in order to get away with it, he's going to simply lie and hope the majority of Americans are so poorly versed in accounting that we'll fall for it, hook, line and sinker.
But the rest of the world is not as stupid as Americans. The rest of the world, the people that are funding our National Debt and Trade Deficits, were looking to the US for an inkling of fiscal responsibility.
They're not going to buy this. And the debts are going to be called.
Hold on, folks. It's going to be a bumpy ride.
Here're the stories:
By Joel Havemann, Times Staff Writer
WASHINGTON — The budget President Bush will present to Congress today will show the federal deficit cut in half by the time he leaves office in four years.
At least technically it will.
Achieving that goal relies on where the budget math starts and stops, how things get counted and what gets left out.
When Bush took office in 2001, the nation had experienced a four-year string of budget surpluses. That changed quickly as the economy slowed, tax rates were cut and spending in the war on terrorism skyrocketed.
By July 2003, the president was urging Congress in his weekly radio address "to make spending discipline a priority, so that we can cut the deficit in half over the next five years."
In his State of the Union address Wednesday, Bush said his fiscal 2006 budget, which he will unveil today, "stays on track to cut the deficit in half by 2009."
But students of the budget say that the president will find it nearly impossible to steer the government along the course that the budget will map out between now and 2009.
"It doesn't quite compute," said Isabel V. Sawhill, director of economic studies at the Brookings Institution think tank, who foresees a shortfall slightly larger in 2009 than now.
It is the 2004 deficit that Bush is promising to cut in half, but he's not starting with the actual 2004 deficit of $412 billion.
Instead, his benchmark is the projected $521-billion deficit that his Office of Management and Budget estimated a year ago, when the fiscal year was four months old. Using half of that figure, Bush's goal is to reach a deficit of $260.5 billion.
If Bush were to start with the actual 2004 figure, his goal would be a deficit of $206 billion — $54.5 billion more.
There are more twists. Bush proposes to cut the deficit in half not in dollars but as a share of the economy. If the economy grows, as is projected, then the deficit will decline as a share of the economy even if it does not shrink by a single dollar.
The 2004 deficit was 4.5% of the economy. So in fiscal 2009 it must be 2.2% or less. That is exactly the average share of the last 43 years, according to the Congressional Budget Office.
Finally, the budget that the president will send to Congress will, like his past budgets, omit some major deficit-raising items.
It will, as Vice President Dick Cheney said on "Fox News Sunday," be "the tightest budget that has been submitted since we got here." It will hold the growth in domestic programs whose spending levels are set in annual appropriations bills to less than inflation.
But these programs, because they exclude defense and giant benefit programs such as Social Security, account for about $1 of every $5 the government spends.
Most of the cost of the Iraq and Afghanistan wars will not be included in the budget. Instead, it will be sent to Congress as a supplemental budget request for 2006, just as the administration recently announced an $80-billion supplemental request for the current fiscal year.
Nor will the cost of introducing private investment accounts to Social Security — $754 billion over the first 10 years alone — be found in the budget, according to administration officials.
That cost will be borrowed, Cheney said, calling the figure a "manageable amount" in terms of dealing with the deficit. He acknowledged that it would also be necessary to borrow "trillions more" after the first decade, but he argued that the private accounts eventually would greatly enhance Social Security recipients' retirement income.
On the tax side, the budget is not expected to show the effect of its proposal to curb the alternative minimum tax, which is likely to win congressional approval.
This tax, designed to hit wealthy individuals who shelter much of their income from taxes, has been snaring a growing number of taxpayers whose income has merely grown with inflation. Preventing the alternative minimum tax's reach from growing would add $44 billion to the deficit that today's budget will project for 2009, the CBO said.
Even if the administration succeeded in getting the actual 2009 deficit to half of its 2004 size, analysts at the Center on Budget and Policy Priorities expect it to rocket back upward shortly thereafter. They point out that the first wave of the baby boom generation would reach the full retirement age of 66 in 2012, sending federal retirement and healthcare costs soaring.
"The 2.2% deficits won't be sustainable for long," predicted Richard Kogan, a senior fellow at the center.
The problem, watchdog groups say, is that the government's spending habits and penchant for cutting taxes do not match the administration's budget-restraint rhetoric.
"This administration has a schizophrenic fiscal policy," said Robert L. Bixby, executive director of the Concord Coalition, which lobbies for smaller deficits. "It has a big-government spending policy and a small-government revenue policy."
Bush's tax cuts, whatever their economic merit, have taken their toll on government income. Tax revenue fell in each of Bush's first three years in office, though this year it is projected to rise to a record level.
But as a share of the nation's economic output, tax payments to the government fell to 16.3% last year, the lowest level since 1959. And in 1959, the government was not paying for Medicare (which cost $297 billion in 2004), Medicaid ($176 billion), food stamps ($29 billion) or the space program ($15 billion).
Spending, meanwhile, was lower than its 25-year average by about 1 percentage point. But at 19.8% of the economy it was $412 billion greater than revenue — a record deficit.
Faced with growing deficits, more conservatives are abandoning the doctrine that the government should run surpluses or hold deficits to a minimum.
"The deficit is merely the uninteresting difference between two very interesting numbers," said Grover Norquist, president of the conservative advocacy group Americans for Tax Reform and an informal advisor to the White House and Republican lawmakers.
Norquist's organization is dedicated to restraining both spending and revenue. Spending is the key, Norquist said. Whether financed by tax revenue or borrowing, it drains money from the private economy.
"The fundamental difference between the two parties," he said, "is how big the government should be."
Norquist's argument has become sufficiently popular that it has spurred formal rebuttal from deficit hawks. Brookings Institution scholars Sawhill and Alice M. Rivlin write in a recent book for the Washington policy research organization that "deficits matter a lot" and "better policies are possible and urgently needed."
Deficits, Sawhill and Rivlin argue, drain money from the economy that could otherwise be used for private investment, thus inhibiting economic growth and forcing interest rates upward. Deficits force the government to set aside a growing share of tax revenue for the payment of interest on the national debt, and "they impose enormous burdens on future generations."
NEWS ANALYSIS
Trim Deficit? Only if Bush Uses Magic
By EDMUND L. ANDREWS
Published: February 7, 2005
ASHINGTON, Feb. 6 - The economy is growing. Tax revenues are climbing. But can these factors rescue President Bush from a federal deficit that seems stuck above $400 billion?
The answer, unfortunately, is almost certainly no, analysts say.
For all the programs that Mr. Bush is expected to slash in his budget proposal on Monday - from health care and housing aid to Amtrak - the cuts would total less than $15 billion next year and barely dent the deficit.
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By far the biggest parts of the budget - Medicare, Social Security and military spending - would be immune from cuts and are expected to grow rapidly for years to come.
On top of that, Mr. Bush's plan to replace part of Social Security with private savings accounts could require additional trillions of dollars in borrowing over the next several decades.
The cornerstone of Mr. Bush's budget strategy is a belief that vigorous economic growth, spurred by supply-side tax cuts that were designed to provide incentives for upper-income Americans to produce more wealth, will generate big jumps in tax revenue that gradually reduce the deficit.
At first glance, he would seem to have grounds for optimism. After all, surging tax revenue did come to Washington's rescue during the economic boom of the 1990's, pushing the budget from the red to the black. Republican and Democratic budget analysts, however, say that such an event is much less likely this time around. The contrasts are stark:
¶Through most of the 1990's, government spending grew at a snail's pace. But government spending soared during President Bush's first term and is expected to keep growing rapidly as the nation's baby boomers start to claim old-age benefits.
¶In the 1990's, the biggest jump in revenues came from high-income taxpayers who made enormous profits in the stock market bubble that ended in 2000. But Mr. Bush's tax cuts of 2001 and 2003 reduced rates on the wealthiest taxpayers and cut in half the taxes on dividends and capital gains, making it all but impossible for revenues to rise at a substantially faster pace than economic growth.
¶Mr. Bush's own projections leave out the cost of rolling back the alternative minimum tax, a parallel tax that is expected to ensnare tens of millions of middle-income households as incomes rise with inflation. Republicans and Democrats both want to prevent such a trap, but a fix would cost roughly $500 billion over the next 10 years.
"I don't think we are likely to see a repeat of the 1990's," said Douglas Holtz-Eakin, the Republican-appointed director of the Congressional Budget Office. "We can't grow our way out of this."
When Mr. Bush unveils his budget plan on Monday, White House officials hope to focus public attention on his proposals to cut scores of domestic programs: Medicaid, housing programs and Amtrak subsidies, among others. But while many of those cuts would be severe, their impact on the deficit would be small.
Administration officials have proposed changes they say would reduce Medicaid spending by $60 billion over 10 years, or about $6 billion a year. Mr. Bush would cut spending on community development programs, consolidating 18 programs into 2 and reducing annual outlays from $5.6 billion to $3.7 billion.
Eliminating operating subsidies for Amtrak, which would face intense opposition in Congress, would save about $1.2 billion a year.
In all, Mr. Bush has vowed to cut or eliminate 150 government programs. But Republican Congressional analysts predicted on Friday that those cuts would be unlikely to save more than $15 billion. And even those savings may not materialize.
Last year, Mr. Bush called for cutting or eliminating 65 programs, for a total projected saving of $4.8 billion. But Congress agreed to eliminate only four of those programs, for a savings of less than $200 million.
The other side of Mr. Bush's equation - higher tax revenues that result from faster growth - is unlikely to fill the gap. Despite strong economic growth and soaring corporate profits last year, federal tax revenues amounted to only 16.3 percent of the total economy, comparable with levels in the 1950's and far below the level of 21 percent reached during the stock market bubble in 2000.
"What's unrealistic is that they are trying to fund a government with today's demands on a 1950's stream of revenue," said Robert Bixby, executive director of the Concord Coalition, a research group that advocates fiscal discipline by the government.
Tax revenues soared far beyond expectations during the economic boom and stock market bubble of the late 1990's, but budget analysts say there is little likelihood of repeating that feat in this decade.
One reason is that Mr. Bush's tax cuts of 2001 and 2003 went largely to the nation's wealthiest taxpayers, the same people who accounted for the unexpected flood of tax revenue last time around. White House officials are already counting on tax revenues to surge by at least $200 billion this year, an increase of about 10 percent, and to climb more gradually after that.
But even Mr. Bush's conservative allies have warned that those inflows will not be enough to cover the continued growth in overall government spending. Brian Riedl, budget analyst at the Heritage Foundation, a conservative research group here, estimated that deficits would remain around $400 billion through 2009 if current spending trends on Iraq and major benefit programs continued.
For Mr. Bush to fulfill his promise of cutting the deficit in half by 2009, Mr. Riedl said, the president would have to cut $200 billion from domestic programs that now cost less than $500 billion a year.
"There is no way you can reach that goal by cutting only discretionary spending," Mr. Riedl said. "You have to go after entitlements as well."
About two-thirds of the $2.3 trillion federal budget now goes to entitlement programs. The Congressional Budget Office estimates that costs for Medicare will rise $55 billion in 2005, to $380 billion. Social Security outlays are expected to rise to $540 billion, from $517 billion.
But Mr. Bush has focused almost all of his budget cuts on discretionary domestic programs costing a total of $466 billion last year. Freezing spending at current levels on the vast array of programs Washington supports - thus allowing them to grow simply at the rate of inflation - would save about $10 billion next year, according to the Congressional Budget Office; a politically difficult reduction of 1 percent would save about $15 billion.
Senator Judd Gregg, Republican of New Hampshire and chairman of the Senate Budget Committee, said neither Mr. Bush's spending cuts nor his hope of strong economic growth would be enough to close the gap.
"You can't get there from here unless you look at entitlements," Mr. Gregg said last Thursday. "It's for the same reason that Willy Sutton said he robbed banks: Because that's where the money is."
Chad Kolton, a spokesman for the White House Office of Management and Budget, said Mr. Bush was on track to cut the deficit by half over the next five years. "We have a two-pillar approach for getting the budget deficit down by half," Mr. Kolton said, "by restraining the growth in government spending and encouraging greater economic growth that leads to higher tax revenues."
But even if rising tax revenues do help reduce the deficit over the next five years, the subsequent five years are likely to be far more difficult.
For starters, Mr. Bush wants to permanently extend his tax cuts rather than allow them to expire by 2011. That would cost about $1.8 trillion over the next decade, and most of the cost would occur after 2009.
If Congress prevents an expansion of the alternative minimum tax, which Mr. Bush has said he wants, the cost would be $500 billion over the next decade and well over half of those costs would in the second five years.
Those blows would be hitting the budget at the same time that the costs of the new Medicare prescription drug programs approach $100 billion a year and as the flood of baby boomers start to claim Social Security and Medicare entitlements.
By that time, however, Mr. Bush will no longer be in office.
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User Originated Comments:
From: maybe ...
2005-02-09 12:57:21
yeah ... maybe we could just tax ourselves into
prosperity.
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