Cuts, taxes, deceptions

February 13, 2005

AT THE Detroit Economic Club last week, President Bush boasted that his latest budget is "the most disciplined proposal since Ronald Reagan." And, yes, his proposed cuts -- in food stamps, Medicaid, housing and child care -- are stunning, mainly for their targeting of low-income workers and families.

But even President Reagan never displayed such a taste for tax cuts, though he tried at first. Faced with mounting deficits, Mr. Reagan reversed himself, raising taxes. Mr. Bush's father did the same, despite pledging otherwise. Both showed fiscal discipline.

Mr. Bush can make no such claim. His budget reduces and freezes discretionary, nonsecurity spending -- hitting programs for the needy but doing little to fight deficits, as these programs make up less than 20 percent of the budget. Then Mr. Bush would more than negate these savings by making permanent his 2001 and 2003 tax cuts and even allowing new cuts for the well-off.

Already, the president's first-term tax cuts have driven federal tax revenues as a share of the nation's gross domestic product to the lowest level since the 1950s. Already, these cuts are set to add about $2 trillion in federal debt through 2010. Debt interest is now among the fastest-rising budget items.

Undeterred, Mr. Bush now wants to extend his tax cuts and allow new ones, adding $130 billion in debt over the next five years. For Washington, that isn't so much. But that's only because these cuts for the most part were already built into budgets through fiscal 2010. If you look out 10 years -- and with this budget, Mr. Bush is the first president to use only five years -- enshrining his tax cuts, with interest, would cost $1.6 trillion.

Also neatly omitted from this budget is the cost of another cut, fixing the alternative minimum tax, originally designed to ensure that the wealthy pay some taxes but now increasingly hitting middle-income earners. An AMT fix is very likely, at a cost of almost $770 billion -- bringing the projected 10-year tax-cut tab to $2.4 trillion. That's a lot more than the mere $130 billion cost of the tax cuts in Mr. Bush's five-year budget.

And these aren't even the most deceptive omissions in this budget -- which includes neither the costs of the war in Iraq ($60 billion a year) nor those of proposed Social Security reform ($1 trillion or more the first decade).

Even so, we find most galling two provisions of Mr. Bush's budget that would allow a planned phase-out of limits on very high earners taking personal exemptions and certain itemized deductions on their taxes. About 97 percent of these cuts' benefits would go to households earning more than $200,000 a year.

Let's see now, Mr. Bush wants to cut services to the needy. He wants to extend tax cuts that favor the well-off and that add trillions of dollars in debt. He hasn't accounted for the costs of an AMT fix, the Iraq war or Social Security changes. And he would allow two new tax cuts for top earners.

That sort of fiscal discipline certainly takes political courage. But it's hardly the same kind as that displayed by President Reagan or Mr. Bush's father.

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