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Archive for Sunday, February 8, 2004

Bush budget ignores financial reality

February 8, 2004

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President Bush, in a budget message longer on wishful thinking and political calculation than on realism, set his top goals as winning the war on terror, maintaining domestic safety and spurring economic growth.

Only then did he list, as "another important priority, cutting the budget deficit brought on by recession and war."

The order of his priorities suggests that the nation's first president with a master's degree in business administration continues to resist any suggestion that his own fiscal management has contributed to the way that the massive long-term budget surplus he inherited became an equally massive long-term deficit.

To Bush, the chief factors are a sharp decline in revenue, stemming largely from the drop in the stock market and a recession that began soon after he entered office, plus increased spending on defense and homeland security to meet the terrorist threat. He also notes he inherited increased domestic spending initiated by his predecessor, Bill Clinton.

"Had there not been one dime of tax relief under President Bush, we would have still run substantial budget deficits," his message said.

To the president's critics, the added costs of defense, homeland security and domestic programs are dwarfed by the revenue losses from the series of Bush tax cuts.

Discretionary domestic spending has been relatively stable, said the liberal Center for American Progress, contending that more than half of this year's record $521 billion deficit stems from the tax cuts.

Comptroller General David Walker, a nonpartisan appointee, has made the rounds in Washington for some months, warning that the situation is worse than advertised and requires action to limit the tax cuts, reduce spending and curb the burgeoning costs of Social Security and Medicare.

Though many people in both parties agree, the chances for meaningful action in an election year probably are minimal.

With Bush seeking to extend his tax cuts, any rollback clearly is off the table. And on spending, both Congress and Bush have talked a better game than they have played.

Lawmakers have larded their budgets with all sorts of pork, and Bush has shown no inclination to use his veto power to enforce greater discipline.

In his new budget, Bush sought to put the burden on Congress by inviting lawmakers to consider his plan a ceiling and develop a mechanism to limit spending and make additional cuts.

But he undercut his credibility by failing to include funds for continued U.S. operations in Iraq and Afghanistan that almost certainly will make the deficit even worse.

Looking to the future, most Democrats, including presidential front-runner John Kerry, want to roll back the Bush tax cuts for the wealthiest Americans. But they would use much of the savings to expand federal health and education programs.

Such proposals are nonstarters this year. Indeed, there's no guarantee they would pass next year, even if Kerry wins the presidency. Republicans are certain to keep the House and quite possibly the Senate, meaning that a Democratic president could face significant obstacles in passing a deficit plan that includes tax hikes.

The last two decades suggest that the only solution is for a president and lawmakers to join in crafting explicit proposals. Deficit reduction plans in 1982, 1986 and 1990, raising taxes and cutting spending, passed only with bipartisan support, though Democrats in 1993 passed Clinton's plan without a single GOP vote.

The controversial memoir of former Treasury Secretary Paul O'Neill provides an ironic footnote. According to Ron Suskind's "The Price of Loyalty," O'Neill and Federal Reserve Chairman Alan Greenspan agreed in 2001 that any tax cut should include a "trigger" to suspend the cuts if the budget outlook deteriorated.

The goal would have been to keep the cuts from exacerbating the situation if the projected surplus began to vanish and to save as much of it as possible to bolster Social Security and Medicare.

But Bush opposed the plan and passed his tax cuts without it.

Its inclusion might have kept the deficit under control and prevented a situation that will have to be faced sooner or later, either by this president or the next one.




- Carl P. Leubsdorf is Washington bureau chief of the Dallas Morning News.

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