Budget Deficit Isn’t Shrinking Despite Secretary Snow’s Wishes

Last Friday, Treasury Secretary John Snow broke some good news to the world. The US budget deficit is shrinking thanks to stronger-than-expected tax revenues. He said, "It's pretty clear now that the path we're on will take us below the president's initial target, that is below 2 percent of GDP and beyond that going forward." It’s enough to send one to the thesaurus to find synonyms for “lie.”

The US taxpayer is kicking in more than expected to the federal coffers because the economy is doing better -- despite $60 a barrel oil -- than most thought it would. At the same time, the housing bubble that the business press has been whining about for months hasn’t burst yet, in large part because it is local if it exists at all. And of course, interest rates are being kept low by capital flows into the US because there isn’t any place else to put the money profitably.

And yet, the Secretary is full of it. The budget deficit is a small measure of the government’s indebtedness. After all, what matters is not the yearly shortfall, as much as the accumulated pile of IOUs going back to the Washington administration. That debt has exploded since the right came to power in 1981 with the inauguration of Ronald Reagan, much of it brought on by tax cuts coupled with increased defense spending (the US is in danger of accounting for 50% of all military spending on the planet soon). Despite what Arthur Laffer said, it didn’t balance the budget.

And then, there is the greatest Washington fraud of all. Not everything is in the budget. Social Security has been accounted for separately for decades, with its notional trust fund. And best of all, the hundreds of billions being appropriated for Iraq don’t count. Like the illegal immigrant who cuts the hedges in suburbia, the Iraq war is paid for off the books. An honest accounting there, which is never going to happen, would tack a hundred million or so more a year onto the budget deficit.

As Treasury Secretary, Mr. Snow does have a political ax to grind. It’s his job to put lipstick on the pig, dressing up the most profligate administration in history as a fiscally responsible crew. It’s a sign of how tough the job is when he has to resort to untruths.


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