Reversal of fortune

February 05, 2003

PRESIDENT BUSH has hit on one way to try to control federal spending: Grow the federal budget deficit so rapidly - by shamelessly providing so many tax breaks for the wealthy - there won't be that much money left to spend down the road. And what a masterful jump he's now gotten on this.

Mr. Bush took office with a projected budget surplus over the coming decade of $5.6 trillion - and there was talk of eliminating all federal debt by 2008 and maybe salting away some bucks for that fateful day, perhaps in 2016, when Social Security revenue will begin to fall behind its payments.

But in just two years - with his historic tax cuts, a sagging economy and the unforeseen costs of fighting terrorism - that surplus has suddenly evaporated, replaced by red ink as far as the eye can see.

In Mr. Bush's budget released this week, the deficits total a record $304 billion in 2003 and $307 billion in 2004. Over the next five years, the cumulative deficit runs to $1.08 trillion. On paper, that's a surplus-to-deficit collapse of almost $7 trillion in two years, and the reality appears to be far worse.

The administration's deficit forecast paints a rosier picture by looking forward only five years, not 10. It doesn't take into account the cost of a war in Iraq. It also doesn't include $500 billion for Mr. Bush's plan to fix the Alternative Minimum Tax.

As a result, the liberal Center on Budget and Policy Priorities says the five-year deficit projection is more like $2.3 trillion and the 10-year deficit likely exceeds $4 trillion. And that doesn't include Mr. Bush's latest proposed handout to the rich, his creation of new, non-taxable IRA-like accounts - likely to cost hundreds of billions of dollars more in lost tax revenue.

This is a stunning reversal of fortune - one largely driven by the administration's aggressive tax-cut plans. It mortgages the future, making doublespeak of the president's promise in his State of the Union address last week to not pass along problems to other generations. Mr. Bush's radical tax cuts now make it far more likely younger Americans will later bear much greater tax burdens to provide Social Security and Medicare to aging baby boomers - or these safety nets will have to be drastically cut.

Of course, like President Ronald Reagan, Mr. Bush and his supply-side economists believe his tax proposals will so grow the economy that there will be more than enough for all. This is uncertain at best; Mr. Reagan's similar agenda led to big deficits.

What's certain are big windfalls for the wealthy from his plans for tax-free dividends and those new savings accounts - as well as wide-ranging cuts in federal social programs. His 2003 budget plan essentially freezes spending on social and environmental programs, doesn't help slumping states and cities, and seeks savings by cracking down on recipients of Medicaid, school lunches and earned income tax credits. If Mr. Bush's tax cuts become law, you can bet much deeper cuts will come.

Some deficit spending might be justified if it provided immediate stimulus for the reluctant economic recovery. But Mr. Bush's proposals don't even pretend to do that. They mainly serve the economic interests of those with the very highest incomes - for which the vast majority of us could be paying for generations.

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