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Thursday, September 04, 2003

Money, money

One problem with starting a new blog: how does one jump into the midst of wide open discussion?

Consider the US federal deficit, for example.

I have never really been too concerned about the level of federal spending. Clinton's surplus wasn't pleasing, largely because it accumulated after he failed to get a health care plan through Congress. And he didn't try to spend real money on other national priorities.

In any case, everyone already knows that the Bush-era deficit is projected to be about $400 billion this year -- and around $480 billion next year. And those are White House figures, so they're probably conservative.

There is good news: Social Security is running a $150 billion annual surplus.

Oops, the government intends to spend that as well...making the real deficit $550 billion, heading to $630 billion.

And then there's the war, which is costing about $4 billion per month. The war's cost does not come out of the real defense budget -- the President requested and Congress appropriated emergency funds for the war ($79 billion was appropriated in April). The Congressional Budget Office guesses, based on last year's spending, that Iraq and Afghanistan could cost $818 billion through 2013. Since many smart people are now saying that the war could soon cost even more (if additional troops are added or if reconstruction efforts are hastened), this might turn out to be a very low estimate. Indeed, today's Washington Post includes a story noting that the White House is virtually doubling its request for spending toward Iraq this year.

So maybe the next couple of deficits are going to reach $620 billion, heading to $700 billion next year.

When does this become serious money? I've read the reports that compare the current deficit to the Reagan-era deficits, and these are lower as a percentage of GDP (so far). I guess Wall Street types and economists would figure that the current deficits won't bust the bank or harm the economy too much.

Of course, elections aren't won or lost based on what Wall Street or economists think. The political consequences could be more important than the economic effects.

Is this the kind of issue that will resonate with voters? Do voters know that the growing deficit is greatly influenced by the Bush tax cuts? Let's see, the 2001 tax cuts cost about $160 billion annually according to the Bush administration, or $350 billion annually if you believe Citizens for Tax Justice. The post 9/11 economic stimulus came largely in the form of tax cuts (about $70 billion per year). The 2003 tax cuts, by the administration's own count, will cost about $120 billion for the next few years.

So that means three years of tax cuts are costing $350 billion annually, by White House figures, or perhaps up to $500 billion if you want to believe third party estimates.

That's the bulk of the overall deficit. Is it trite to point out that Bush is lucky he's not governor of California?

I've read the White House transcript on this issue reportedly relayed by spokesperson Scott Stanzel:

" The President supports a balanced budget amendment, and is working to restrain spending so that we can reduce the deficit. However, the President also believes that protecting the lives and liberties of the American people may demand temporary borrowing, which is why he believes a balanced budget amendment should include exceptions for war, emergency and economic recession. The President has a plan to cut the deficit in half in five years through stronger economic growth and responsible spending restraint."

Ah, spending restraint. Does anyone believe this anymore (you have to select the August 6 story on the "Republican Honesty Deficit")?

Most of the Democratic candidates are now deficit hawks, and I'm not sure that's going to get them anywhere. Does this issue have traction? Howard Dean certainly talks about the deficit a great deal. Most of the candidates are saying they'll reverse the Bush tax cuts, but they also intend to spend the money on health care, so there wouldn't be much left for cutting the deficit.

Defense spending doesn't seem to be on the table, even though there's plenty of fat to be cut there. Before 9/11, Donald Rumsfeld was ostensibly going to do something about recasting the military, making it leaner for the 21st century. In the current context, however, the old spending rolls over and plenty of new spending is simply added to the total. Where's the public face of the Cato Institute when it's really needed?*

I'd better stop for today and do my real job.

* I included that reference because I know the web is crawling with libertarians. Many libertarians end up voting for Republicans, but on this issue the Institute uses titles like "Reforming a Defense Industry Rife with Socialism" and "Exploiting the War on Terrorism to Cash in at Taxpayers' Expense."

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