CBO Says US National Debt to Explode in Second Bush Term

The Congressional Budget Office, a pretty neutral place in the hyper-political town of Washington, has reported that the US budget deficit is going to come in at $368 billion in fiscal 2005. This is a noteworthy decrease from fiscal 2004’s $412 billion. It looks like Mr. Bush is on his way to halving the deficit by the end of his second term. Looks are deceiving.

First and foremost is the war. Mr. Bush is funding this off the books. What that means is that he just isn’t adding it into the cost of running the US of A. Yesterday, press reports said that the White House was going to ask Congress for another $80 billion for the war. The CBO had originally estimated that figure would be $110 billion later lowered to $100 billion. Whichever figure is correct doesn’t matter. This is nonsense accounting. If the government is going to spend that kind of money and not provide revenues to cover it, that is OK, if unwise, so long as it says so. But then, the $368 billion deficit is really going to be almost $450 billion, and that isn’t so good politically. Perhaps Mr. Bush shouldn’t have made the promise.

Then, there is the Social Security reform effort. If Mr. Bush does get his reforms, there will suddenly be as much as $1 trillion in transition costs over the next decade. These numbers change according to which economist and politician one asks but the point is that change adds to the deficit unless revenues increase. Higher taxes are not going to happen under this president.

In fact, it is an article of faith for Republicans of virtually any stripe that taxes are going down again. Whether there is a fresh round of tax cuts or whether the current cuts are “made permanent” doesn’t much matter, future revenue will not be as high as it would otherwise be. The GOP faithful don’t buy this – some still believe that Arthur Laffer’s curve works in this universe. If it did, no taxes at all would result in infinite government revenues. Be that as it may, less revenue means bigger deficits unless there are similarly sized cuts in spending. Mr. Bush’s GOP is a “borrow-and-spend” party, not one of fiscal rectitude. Spending cuts, then, aren’t going to happen either except in places where no GOP votes get lost.

Vice President Cheney once told Paul O’Neil, “"You know, Paul, Reagan proved deficits don't matter.” That is the main problem with the Bush approach to the matter. These huge deficits essentially make America poorer, the economy grows more slowly, and jobs pay less because businesses earn less. Deficits don’t matter only if one never intends to repay one’s debts.

© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.

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