Red Ink Galore

9 February 2004


Bush's Budget Sets Record Deficit

It is a shame that the American Congress cannot seem to get a budget passed on time, and hasn't for years. Then again, when the budget that comes from the White House is as ridiculous as the one President Bush offered last week, it's no surprise that Congress feels the need to start from scratch. Budgets ought not to be works of speculative fiction.

Granted, it is an election year and politicians have no desire to give voters bad news before polling day. However, both ends of Pennsylvania Avenue are being painfully dishonest at the most fundamental level this time around. The spending on Afghanistan and Iraq, some $87 billion officially, is not included thanks to the agreement between the legislative and executive branches reached several months ago. If Uncle Same didn't have to pay the money, that would be acceptable accounting. But American taxpayers are on the hook for the dough, and it needs to come from some where (taxes). Add in a little cost over-run because this is a Washington project, and one starts with a budget that is around $100 billion off.

Then, Mr. Bush suggests 128 programs that are to have their funds cut either in part or in total (including a $8.2 million program on decontaminating buildings with toxins like ricin that was mailed to Senator Frist's office last week). With certain members of congress on both sides of the aisle garnering votes from pet projects, there is very little hope that these spending cuts will stick. The budget also assumes advantageous (to Mr. Bush) changes in the economic environment, with more jobs, slack inflation and lower bond yields. There is a joke about a mathematician, an engineer, and an economist starving on an island with nothing but canned provisions. Mr. Bush is like the economist who's solution to the problem starts with "assume a can-opener."

Meanwhile, the Bush budget also assumes revenue gains of 13.3% in 2005 and 8.3% in 2006. These outpace any estimates of GDP growth, and therefore, they can only be achieved by higher taxes -- something Mr. Bush has not proposed. Even during the stock-market bubble days of Mr. Clinton, a 22% revenue increase in two years was beyond reason.

The official deficit is around $521 billion. Throw in Iraq and Afghanistan's $87 billion, make more realistic assumptions about spending and revenues, and the figure $650 billion is likely to be surpassed. Yet without the Iraq war and without the Bush tax cuts, the deficit would be a mere 2% of GDP, most manageable. Fiscal conservatives (and there are some on the left -- one cannot redistribute wealth that doesn't exist) must stop the madness. And if they cannot, at least, they could the White House and Congress into providing the taxpayers with an accurate bill.

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