The $3.1 trillion budget submitted last
week by President Bush, with a projected $407
billion deficit for 2009 {based upon best case scenario—jk}, reminds us of the huge gap
between uplifting political rhetoric -- including the rhetoric of this campaign -- and the grim realities of governing. Budgets
are not just numbers. They express political choices. What should government do and who should pay? The reigning philosophy,
practiced by both parties and largely approved by the public, is to evade choices.
Since 1961, the federal government has run deficits in all but five years. Only the surplus of 1969 stemmed from deliberate
policy: a 10 percent income surtax reluctantly passed by Congress in 1968. The others (1998-2001) mostly reflected good fortune:
the end of the Cold War, resulting in a 40 percent drop in defense spending as a share of the economy, and an unexpected surge
in taxes from the economic boom. Neither was a policy act of the Clinton administration or the then-Republican Congress.
Bush
says his policies would produce a balanced budget by 2012, but his underlying assumptions are laughably artificial. First,
he omits most of the future costs of the Iraq war (for budgeting, he effectively adopts his critics' plan
of rapid withdrawal). Second, he assumes big savings in Medicare by freezing reimbursements to doctors and hospitals -- a
policy Congress won't adopt. Third, he doesn't offset the growing revenue bite of the alternative minimum tax (AMT) that would
result in a sizable tax increase -- an outcome Bush rejects.
The only way Bush could balance the budget would be by not following Bush's policies. The most telling figures in his
budget involve his proposal to eliminate or dramatically reduce 151 programs, for a savings of $18 billion. That's six-tenths
of 1 percent of federal spending. What's telling, though, is that Congress will probably reject even many of these proposals.
Based
on campaign policies, none of the major presidential candidates would do much better. Sen. John McCain , the Republican front-runner,
and Democratic Sens. Hillary Clinton and Barack Obama are alike in not addressing the central budget issue:
baby boomers' retirement costs. Already, Social Security, Medicare and Medicaid are 44 percent of federal spending. In 2007,
these programs cost $1.2 trillion, more than double all defense spending.
McCain says spending will have to be cut but doesn't say where. He would eliminate the AMT and cover the costs by curbing
congressional earmarks (spending projects designated for specific districts) and closing tax loopholes, says economic adviser
Douglas Holtz-Eakin. McCain's overall goal is to balance the budget by the end
of his second term, says Holtz-Eakin. That would be 2017.
Clinton and Obama haven't said when they'd balance the budget. But each has a long list of new spending increases
and tax cuts. Both have health-insurance proposals intended to cover the 47 million uninsured. Clinton says her
plan would cost $110 billion. Half would be paid by raising taxes on those with incomes exceeding $250,000, something that
Obama would also do. Obama would provide a permanent $500 tax cut for about 150 million workers, or $1,000 for a two-earner
family; he would also exempt from income taxes retirees making less than $50,000. Both would provide more-generous tax credits
for college. Their lists run on.
Both campaigns insist that all their new proposals are "paid for" through tax increases, closed loopholes, reforms
of government contracting and various assumed "savings." It seems doubtful that this claim would survive strict scrutiny.
But even if it did, neither candidate offsets the spreading AMT. Possibly, savings from withdrawing from Iraq might
cover some of those costs. Still, sizable budget deficits would continue.
But most Americans don't seem bothered. That's why both parties devote so little effort to addressing government spending
or the deficits. As a society, we seem to have made a choice. It is to not control government. Almost every new spending plan
or tax cut is simply piled atop previous spending programs or tax cuts. Democrats have spent seven years denouncing Bush's
tax cuts but are willing to repeal only the cuts benefiting those with incomes above $250,000. When Republicans created the
Medicare drug benefit (2007 cost: $41 billion), it was simply added to existing benefits.
Government acquires more functions because no one dares strip away any existing functions. People, states, localities
and industries think they have a moral entitlement to their tax breaks, benefit checks and spending programs. There is an
unstated presumption that the gradual growth of government is unthreatening to the economy, but as the population ages, taxes,
budget deficits or both will rise. The increases could be substantial. That we are not debating the possible consequences
is a cop-out -- but it is a cop-out in which the public is conspicuously complicit.
