WHITE HOUSE budget director Mitchell E. Daniels Jr.'s announcement that the federal budget will almost surely be in deficit at least until 2005 underscores the need for Congress to pass a sensible stimulus bill. But it also underscores the dangers of the proposed budget-busting tax breaks that stand in the way of a bipartisan stimulus bill.
The White House's announcement marks a dramatic reversal in the nation's fiscal fortunes. After almost 30 years of deficits, the federal budget ran large surpluses from 1997 to 2000. And just six months ago analysts forecast a $5 trillion surplus over the next 10 years. Now, according to Mr. Daniels, spending decisions over the next year "will determine whether we ever see another surplus."
White House spokesman Ari Fleisher argues that "the best way to return to an era of surpluses and prosperity is for the Senate to pass a stimulus bill." He may be right.
But an effective stimulus bill must get money right away to those who need it most -- and are most likely to spend it. And enacting a bill with some of the provisions in the bill the House passed in October and that Senate Republicans, with support from the administration, continue to insist on, could be the worst prescription for the nation's fiscal health.
Repeal of the minimum corporate tax, for instance, would cost about $24 billion over the next 10 years. And the House bill would also spend $15 billion to refund minimum tax payments made by large corporations as far back as 1986. But as moderate Republican Sen. Olympia J. Snowe notes, "The economists I've talked to say repeal wouldn't be stimulative at all."
The president and most Senate Republicans also insist a stimulus package accelerate the tax cuts for upper-income people contained in the $1.35 trillion tax-cut package passed earlier this year. Doing that would cost about $122 billion over the next four years. But because almost all the added income would arrive years from now, when economists believe the recession will be over, such tax cuts do almost nothing about today's recession even as they increase future deficits.
Senate Democrats and Republicans also remain divided over how to help the jobless get added unemployment benefits and access to health care. Those differences, though, are now modest compared with the ones over further tax cuts.
President Bush has noted that the "country is waiting for action" on a stimulus bill. But, in sharp contrast to the full-court press he waged for last summer's tax cuts, Mr. Bush has done little to push Congress to fashion a bipartisan stimulus bill.