Unambitious and Impossible

4 February 2005



State of the Union: Deficit

By the time Mr. Bush got to discussing the federal budget deficit in the State of the Union, wise remote control operators had found Fox Sports World’s time-delay broadcast of the Chelsea-Blackburn Rovers match in the English soccer league. Mr. Bush reiterated his vow to cut the deficit in half by the time he leaves office. This unambitious goal ignores the hemorrhaging of money in Iraq, which is kept off the books through what can only be described as magic. This goal just isn’t good enough, and with Mr. Bush’s priorities, it is impossible.

In his own words, Mr. Bush laid out an impossible approach:

America's prosperity requires restraining the spending appetite of the federal government. I welcome the bipartisan enthusiasm for spending discipline. I will send you a budget that holds the growth of discretionary spending below inflation, makes tax relief permanent, and stays on track to cut the deficit in half by 2009. My budget substantially reduces or eliminates more than 150 government programs that are not getting results, or duplicate current efforts, or do not fulfill essential priorities. The principle here is clear: a taxpayer dollar must be spent wisely, or not at all.
The first and last sentences should be carved in stone. The rest is less certain. Holding discretionary spending below inflation does nothing for the budget deficit, since discretionary spending excludes Social Security payments, and in Mr. Bush’s mind, military spending. The deficit he has promised to halve is US$521 billion – so he’s looking for reductions of around $210 billion. One doesn’t get that from capping discretionary spending to a rate below inflation – that just makes the deficit rise more slowly. And it only affects about 1/6 of the entire budget.

Permanent tax relief doesn’t help either. Deficits result from expenditure exceeding revenue. For government, revenues mean taxes. If Mr. Bush insists on reducing expenditure as he has outlined (not at all, really), revenues from taxes must increase to cut the deficit. That isn’t the same as hiking taxes because a booming economy will provide more revenue under the same tax laws as a foundering one will. Unfortunately, Mr. Bush’s deficit has arisen while GDP has expanded at pretty substantial rates. So, revenue really can only rise if the tax cuts of recent years are allowed to lapse.

If there is one place that the most rabid opponents of Mr. Bush would like to be wrong for patriotic reasons, this is it. Nothing would please the Kensington Review more than to have Mr. Bush succeed in dropping the deficit for 2009 to $220 billion. A surplus would be even better for a time, economic cycle permitting, but Mr. Bush’ goal would still be an improvement over the current situation. It is unambitious, but given the constraints he has chosen, it is equally impossible.

There was a small shred of hope, though. Chelsea beat Blackburn 1-0 to extend the lead in the race for the Premiership title to 11 points over Man U. A world where America’s budget deficit outrageously huge is better when the right soccer team wins.



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

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