Federal Budget Disaster Seen, but Won't Be Heard
By Janet Hook for the LA Times.
Even though the government is on track to run a record deficit in excess of $500 billion next year, neither President Bush nor congressional leaders have proposed doing anything to balance the budget anytime soon. Their strategy: to wait for a vigorous economy to do the job for them.
That makes David M. Walker, head of the General Accounting Office, Congress' investigative arm, a rare Cassandra. He is giving a speech today warning that the nation's long-term fiscal outlook is seriously out of whack. And he challenges the assumption that economic recovery will solve the problem painlessly."We need a wake-up call," Walker said in an interview. "We need to come to terms with reality: The gap is too great to grow our way out of the problem. Tough choices will be required."
His is a lonely voice on Capitol Hill, where deficit-expanding initiatives are growing like crabgrass, unchecked amid new budget demands for the war on terrorism and the reconstruction of Iraq.
Bush and lawmakers from both parties continue to press for a $400-billion, 10-year expansion of Medicare to provide prescription drug benefits. House Republicans are pushing yet another round of tax cuts — this time for big business, at a cost of more than $100 billion over 10 years. And even as Bush asks for $87 billion more for military and reconstruction efforts in Iraq and Afghanistan, there seems to be little appetite in Congress for offsetting cuts in domestic spending.
"This is truly a Lyndon Johnson guns-and-butter fiscal policy," said Daniel J. Mitchell, a senior fellow at the Heritage Foundation, a conservative think tank.
Here is the full text of the entire article in case the link goes bad:
http://www.latimes.com/news/nationworld/nation/la-na-budget17sep17002429,1,2719244.story
September 17, 2003
Federal Budget Disaster Seen, but Won't Be Heard
By Janet Hook, Times Staff Writer
WASHINGTON — Something remarkable will happen here today. A senior congressional figure will declare the federal budget, in effect, a disaster area — and official Washington will probably react with a shrug.
Even though the government is on track to run a record deficit in excess of $500 billion next year, neither President Bush nor congressional leaders have proposed doing anything to balance the budget anytime soon. Their strategy: to wait for a vigorous economy to do the job for them.
That makes David M. Walker, head of the General Accounting Office, Congress' investigative arm, a rare Cassandra. He is giving a speech today warning that the nation's long-term fiscal outlook is seriously out of whack. And he challenges the assumption that economic recovery will solve the problem painlessly.
"We need a wake-up call," Walker said in an interview. "We need to come to terms with reality: The gap is too great to grow our way out of the problem. Tough choices will be required."
His is a lonely voice on Capitol Hill, where deficit-expanding initiatives are growing like crabgrass, unchecked amid new budget demands for the war on terrorism and the reconstruction of Iraq.
Bush and lawmakers from both parties continue to press for a $400-billion, 10-year expansion of Medicare to provide prescription drug benefits. House Republicans are pushing yet another round of tax cuts — this time for big business, at a cost of more than $100 billion over 10 years. And even as Bush asks for $87 billion more for military and reconstruction efforts in Iraq and Afghanistan, there seems to be little appetite in Congress for offsetting cuts in domestic spending.
"This is truly a Lyndon Johnson guns-and-butter fiscal policy," said Daniel J. Mitchell, a senior fellow at the Heritage Foundation, a conservative think tank.
Democrats — both in Congress and on the presidential campaign trail — have tried to spotlight the deficit as an emblem of the failure of Bush's fiscal policy. It has given new impetus to Democratic proposals to repeal all or part of the 2001 tax cut. Some congressional Democrats are considering a proposal to help cover Iraq costs by raising taxes on the wealthiest taxpayers.
"The deficit is an easy-to-understand symbol that things are being mismanaged," said David Sirota, spokesman for the Center for American Progress, a liberal research group. "It should reopen the entire debate on whether we should continue cutting taxes for the wealthy."
But the Democratic Party is deeply divided over whether or how far to raise taxes. And with their own big spending plans for Medicare, education and other domestic priorities, Democrats also lack a clear program for getting the budget back into balance. Missing from the presidential field is an H. Ross Perot, whose 1992 maverick campaign made budget balancing the cornerstone of his challenge to the Washington establishment.
"Nobody is prepared to make any trade-offs," said Robert Bixby, executive director of the Concord Coalition, a budget watchdog group. "No one is prepared to give up anything important to them to bring the budget under control."
The deficit has cast an increasingly long shadow over Congress with each upward revision. In August, the Congressional Budget Office said the deficit in 2004 would reach $480 billion — and that did not include the cost of the conflict in Iraq or pending legislation to expand Medicare. Now, in light of its Iraq budget request, the administration projects that next year's deficit will reach at least $525 billion.
It seems certain that Congress will approve at least the $87 billion Bush has requested. The bigger question is whether that will boost the deficit so high that lawmakers will reassess other parts of the budget or change their legislative ways.
Sen. Olympia J. Snowe (R-Maine), who voted against Bush's tax cut last spring because she was concerned about the deficit, said she thought the budget was putting new pressure on lawmakers to propose offsetting spending cuts when they propose increases — as she plans to when she pushes for more child-care funding in a welfare bill soon to come before the Senate.
"The deficit is now back on everyone's radar screen," Snowe said. "On the spending side, we have to make some choices."
But Snowe herself demonstrates why it will be so hard to reverse the current trend. Even though she says she is an adamant foe of deficits, Snowe still wants to go ahead with the $400-billion Medicare drug benefit. "Medicare is an exception and it should be," she said.
Bush and other politicians argue that running a deficit is justified at a time of military conflict abroad and economic downturn at home. His administration's stated goal has been to cut the deficit in half in five years. Rather than propose tax increases or big spending cuts, he is counting on economic growth to increase government revenue and reduce the red ink.
Bush and his Republican allies argue that tax cuts will help reduce the deficit, not increase it, because they spur the economic growth that will generate new revenue. That is why House Republicans are still plowing ahead with plans this week to pass another $12.5-billion tax cut to encourage charitable giving. A bigger test will come this fall when Congress debates a big-business tax break later this fall. A version drafted by House Ways and Means Chairman Bill Thomas (R-Bakersfield) would cost $127 billion over 10 years.
"When you give people their money back, they grow the economy much better than the government does," said House Majority Whip Roy Blunt (R-Mo.). "The way to move out of deficit is to grow the economy."
Walker and other analysts argue, however, that economic growth alone will not bring the budget back into the black. They say that will require aggressive anti-deficit initiatives on a par with those launched in the 1980s and 1990s.
A 1985 law, for example, set up a mechanism to make automatic spending cuts if Congress missed specified annual deficit targets. In 1990, a tax hike was passed with the support of President George H. W. Bush, the current president's father.
In 1993, President Clinton and Congress passed a package of tax increases and spending cuts. In 1997, Congress passed a budget-balancing plan that included politically painful reductions in the growth of Medicare spending.
Now, however, any tax hike is anathema to a Republican Party that has turned into a bastion of tax cut enthusiasts in the decade since the elder Bush left office.
On the other hand, according to a study by the libertarian Cato Institute, the current president's first three annual budgets increased outlays by 15.6% — compared with 6.8% in President Reagan's first three budgets.
