Four Hundred Billion Dollars

February 02, 1992

Every day in every way the United States is going deeper into the hole by more than $1 billion. That works out to over $4.25 a day for every child, woman and man in America, or an estimated $1,565 per person in the course of a year.

The federal deficit for fiscal 1992 ending next October is a record $399.2 billion, up 48 percent from the $269 billion of a year ago. Before President Bush's current term expires, the national debt will be pushing toward $4 trillion dollars. What a crushing burden on this and future generations!

Yet nothing -- absolutely nothing -- on the political scene in Washington offers much hope for a change for the better. On the contrary, the executive branch for the first time in history has given up even the pretense of balancing the budget.

This was a favorite gimmick in the days of Gramm-Rudman. It was a dream embodied in the 1990 budget agreement, the Bush era's only real push for fiscal sanity. But now it is gone. The structural deficit projected forward for as far as the eye can see is at least $200 billion annually -- a figure that should be regarded as minimalist.

The sad fact is that the national government, collectively, has lost the will, the means and even the hope of bringing the budget into balance. The nation seems condemned to a course in which more and more of its gross domestic product will be poured into a government budget increasingly consumed by interest on the national debt. This is a deadly process that builds on itself.

All of the above is a gloomy preface to the election year budget battle shaping up on Capitol Hill in the wake of Mr. Bush's State of the Union message. Neither the president nor his Democratic foes have the guts to admit what every economist knows -- that a middle-class tax cut will have negligible effect on the recession and a detrimental effect on the crusade for fiscal discipline. Instead, Mr. Bush proposes an increase of $500 on personal exemptions, probably to be paid for out of "peace dividend" cuts in the Pentagon budget. Instead, the Democrats are likely to push a $200 tax credit financed by an increase in marginal tax rates to 35 percent and 38 percent for the wealthy.

Both plans should be rejected. But political pressures have become irresistible, chiefly because both parties have misled the public into thinking a middle-class tax cut will provide respite from hard times. Thus, a consumerism tax cut seems in the cards. This despite the fact it will expand the deficit, put upward pressure on interest rates and send a message to the world that the United States is not serious about putting its house in order.

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