Proposed Budget Article
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Proposed Budget Article
Another Bogus Budget
By PAUL KRUGMAN
Well, whaddya know. Even as the Republican leadership strong-armed the Medicare drug bill through Congress, the administration was sitting on estimates showing that the plan would cost at least $134 billion more than it let on. But let's not make too much of the incident. After all, it's not as if our leaders make a habit of faking their budget projections. Oh, wait.
The budget released yesterday, which projects a $521 billion deficit for fiscal 2004, is no more credible than its predecessors. When the administration promises much lower deficits in future years, remember this: two years ago it projected a fiscal 2004 deficit of only $14 billion. What's new this time is that the administration has decided to pay lip service to conservative complaints about runaway spending.
Over the past few months, many pundits have obediently placed the onus for rising deficits on "a vast increase in discretionary domestic spending," or words to that effect. By the way, the Heritage Foundation, which has orchestrated this campaign, is cagier than those pundits; it covers itself by relying on innuendo, never saying outright that domestic discretionary spending is the source of the deficit.
To mollify these critics, the new budget purports to shrink real domestic discretionary spending. This won't happen; even if it did, it would have a negligible impact on the deficit. But it isn't just a fake solution — it's a response to a fake problem.
The prime cause of giant budget deficits is a plunge in the federal government's tax take, which fell from 20.9 percent of G.D.P. in fiscal 2000 to a projected 15.7 percent this year, the lowest share since 1950. About 45 percent of this plunge can be attributed to the Bush tax cuts. The rest reflects the end of the stock market bubble, the still-depressed economy and — probably — growing tax sheltering and evasion.
It's true that increased spending also contributes to the deficit, and that there has been a substantial increase in discretionary spending — spending that, unlike such items as Social Security payments, isn't automatically determined by formulas. But the bulk of this increase has been related to national security.
Traditional budget measures distinguish between defense and nondefense discretionary spending. Even by these measures, defense accounts for most of the increase in recent years. But a better measure would group homeland security and other costs associated with 9/11 with defense, not domestic programs. The Center for American Progress — confirming related work by the Center on Budget and Policy Priorities — estimates that from 2000 to 2004 security-related discretionary spending rose to 4.7 percent of G.D.P. from 3.4 percent, while nonsecurity spending rose to only 3.4 percent from 3.1 percent.
In other words, the role of nonsecurity spending in the plunge into deficit is trivial, compared with tax cuts and security spending. (Credit where credit is due: the administration's budget numbers show the same thing.) And even severe austerity on nonsecurity spending won't make a significant dent in the deficit.
So what will it take to get the budget deficit under control? Unless Social Security and Medicare are drastically cut — which is, of course, what the right wants — any solution has to include a major increase in revenue.
Many Democrats have called for a partial rollback of the Bush tax cuts, preserving the "middle class" cuts — those that convey at least some benefit to the 77 percent of taxpayers in the 15 percent tax bracket or below. Such a partial rollback would have reduced this year's budget deficit by about $180 billion; that would help, but one hopes politicians realize that it's not enough.
Another major source of revenue could be a crackdown on tax loopholes and tax evasion, which has reached epidemic proportions. In particular, what's going on with the tax on corporate profits? That source of revenue is down, as a percent of G.D.P., to 1930's levels. No, that's not a misprint. And receipts are not growing nearly as fast as one would expect, given an economic recovery that has bypassed workers but given big gains to their employers. An administration that actually tried to make corporations pay their taxes might be able to find $100 billion or more each year.
An eventual budget solution will involve all this, and more. But the first step is to stop looking for villains in all the wrong places.
http://www.nytimes.com/2004/02/0...l...rint&position=
The Pinocchio Budget
The president's new budget proposal is an exercise in election-year cynicism. It calls for cuts in programs President Bush knows Congress will protect and future tax cuts he knows the nation cannot afford. Meanwhile, vital domestic programs, like environmental protection and housing for the poor, wind up as the sacrificial victims.
The budget acknowledges the need to increase spending on homeland security. But the rest of the domestic budget, excluding Medicare and Social Security, would be financed at less than 1 percent growth — a cut, in effect, when inflation is factored in. "Listen, government has got plenty of money," the president insisted last week. It is easy to tell people that a $2.4 trillion budget should have enough in it for everything we need. But when specifics pop to the surface, people will discover that a great deal is lacking — including fiscal responsibility.
The central fiction in the budget is that it constitutes the first step in halving the record $521 billion deficit over the next five years. Mr. Bush accomplished that feat on paper, in part by pretending that there would be no additional costs for the military in Iraq and Afghanistan this year — a supplemental request for an additional $50 billion or so will presumably arrive safely after Election Day. He also ignores the long-term effects of his proposal to make permanent most of the administration's $1.7 trillion in temporary tax cuts.
The budget includes worthy ideas for cuts in wildly overfinanced programs like agricultural subsidies. But without firm White House pressure against election-bound members of Congress, these are simply imaginary savings. Anyone who believes that Mr. Bush is planning to waste large amounts of political capital this year to reduce money for farmers or highway builders is living in a fantasy.
Meanwhile, the president proposes an unconscionable 7 percent cut in spending for the Environmental Protection Agency. His budget proposal plays havoc with the Section 8 housing voucher program, whose main purpose is to keep low-income families from becoming homeless. Education appears on first look to be one of the few winners: the administration requests an additional $1 billion for Title I, the financing stream aimed at impoverished children. But the money does not come close to meeting the needs of local school districts, which are now being required to meet the stiff standards of the president's No Child Left Behind initiative. That is particularly true since the proposed budget would cut other sources of school funds.
Mr. Bush's talk of proposing mandated budget controls on Congress is the final fairy-tale element. The president and the Republican-controlled House and Senate have sent the country swan-diving into debt with their tax cuts. They approved a huge new entitlement for prescription drugs for the elderly that the revenue-starved Treasury could not afford to support. Now they have seen the cost estimate of that new Medicare drug subsidy rise by a third before it even takes effect. The idea that the financial hole can be filled by simply passing a law to demand that Congress make it so is utterly senseless — but it will be useful as a platitude for the coming campaign trail.
Polls are beginning to show that the Republicans are losing their reputation with voters for fiscal integrity. The president's latest proposal will only feed their new image as budget buccaneers.
http://www.nytimes.com/2004/02/0...l...rint&position=
By PAUL KRUGMAN
Well, whaddya know. Even as the Republican leadership strong-armed the Medicare drug bill through Congress, the administration was sitting on estimates showing that the plan would cost at least $134 billion more than it let on. But let's not make too much of the incident. After all, it's not as if our leaders make a habit of faking their budget projections. Oh, wait.
The budget released yesterday, which projects a $521 billion deficit for fiscal 2004, is no more credible than its predecessors. When the administration promises much lower deficits in future years, remember this: two years ago it projected a fiscal 2004 deficit of only $14 billion. What's new this time is that the administration has decided to pay lip service to conservative complaints about runaway spending.
Over the past few months, many pundits have obediently placed the onus for rising deficits on "a vast increase in discretionary domestic spending," or words to that effect. By the way, the Heritage Foundation, which has orchestrated this campaign, is cagier than those pundits; it covers itself by relying on innuendo, never saying outright that domestic discretionary spending is the source of the deficit.
To mollify these critics, the new budget purports to shrink real domestic discretionary spending. This won't happen; even if it did, it would have a negligible impact on the deficit. But it isn't just a fake solution — it's a response to a fake problem.
The prime cause of giant budget deficits is a plunge in the federal government's tax take, which fell from 20.9 percent of G.D.P. in fiscal 2000 to a projected 15.7 percent this year, the lowest share since 1950. About 45 percent of this plunge can be attributed to the Bush tax cuts. The rest reflects the end of the stock market bubble, the still-depressed economy and — probably — growing tax sheltering and evasion.
It's true that increased spending also contributes to the deficit, and that there has been a substantial increase in discretionary spending — spending that, unlike such items as Social Security payments, isn't automatically determined by formulas. But the bulk of this increase has been related to national security.
Traditional budget measures distinguish between defense and nondefense discretionary spending. Even by these measures, defense accounts for most of the increase in recent years. But a better measure would group homeland security and other costs associated with 9/11 with defense, not domestic programs. The Center for American Progress — confirming related work by the Center on Budget and Policy Priorities — estimates that from 2000 to 2004 security-related discretionary spending rose to 4.7 percent of G.D.P. from 3.4 percent, while nonsecurity spending rose to only 3.4 percent from 3.1 percent.
In other words, the role of nonsecurity spending in the plunge into deficit is trivial, compared with tax cuts and security spending. (Credit where credit is due: the administration's budget numbers show the same thing.) And even severe austerity on nonsecurity spending won't make a significant dent in the deficit.
So what will it take to get the budget deficit under control? Unless Social Security and Medicare are drastically cut — which is, of course, what the right wants — any solution has to include a major increase in revenue.
Many Democrats have called for a partial rollback of the Bush tax cuts, preserving the "middle class" cuts — those that convey at least some benefit to the 77 percent of taxpayers in the 15 percent tax bracket or below. Such a partial rollback would have reduced this year's budget deficit by about $180 billion; that would help, but one hopes politicians realize that it's not enough.
Another major source of revenue could be a crackdown on tax loopholes and tax evasion, which has reached epidemic proportions. In particular, what's going on with the tax on corporate profits? That source of revenue is down, as a percent of G.D.P., to 1930's levels. No, that's not a misprint. And receipts are not growing nearly as fast as one would expect, given an economic recovery that has bypassed workers but given big gains to their employers. An administration that actually tried to make corporations pay their taxes might be able to find $100 billion or more each year.
An eventual budget solution will involve all this, and more. But the first step is to stop looking for villains in all the wrong places.
http://www.nytimes.com/2004/02/0...l...rint&position=
The Pinocchio Budget
The president's new budget proposal is an exercise in election-year cynicism. It calls for cuts in programs President Bush knows Congress will protect and future tax cuts he knows the nation cannot afford. Meanwhile, vital domestic programs, like environmental protection and housing for the poor, wind up as the sacrificial victims.
The budget acknowledges the need to increase spending on homeland security. But the rest of the domestic budget, excluding Medicare and Social Security, would be financed at less than 1 percent growth — a cut, in effect, when inflation is factored in. "Listen, government has got plenty of money," the president insisted last week. It is easy to tell people that a $2.4 trillion budget should have enough in it for everything we need. But when specifics pop to the surface, people will discover that a great deal is lacking — including fiscal responsibility.
The central fiction in the budget is that it constitutes the first step in halving the record $521 billion deficit over the next five years. Mr. Bush accomplished that feat on paper, in part by pretending that there would be no additional costs for the military in Iraq and Afghanistan this year — a supplemental request for an additional $50 billion or so will presumably arrive safely after Election Day. He also ignores the long-term effects of his proposal to make permanent most of the administration's $1.7 trillion in temporary tax cuts.
The budget includes worthy ideas for cuts in wildly overfinanced programs like agricultural subsidies. But without firm White House pressure against election-bound members of Congress, these are simply imaginary savings. Anyone who believes that Mr. Bush is planning to waste large amounts of political capital this year to reduce money for farmers or highway builders is living in a fantasy.
Meanwhile, the president proposes an unconscionable 7 percent cut in spending for the Environmental Protection Agency. His budget proposal plays havoc with the Section 8 housing voucher program, whose main purpose is to keep low-income families from becoming homeless. Education appears on first look to be one of the few winners: the administration requests an additional $1 billion for Title I, the financing stream aimed at impoverished children. But the money does not come close to meeting the needs of local school districts, which are now being required to meet the stiff standards of the president's No Child Left Behind initiative. That is particularly true since the proposed budget would cut other sources of school funds.
Mr. Bush's talk of proposing mandated budget controls on Congress is the final fairy-tale element. The president and the Republican-controlled House and Senate have sent the country swan-diving into debt with their tax cuts. They approved a huge new entitlement for prescription drugs for the elderly that the revenue-starved Treasury could not afford to support. Now they have seen the cost estimate of that new Medicare drug subsidy rise by a third before it even takes effect. The idea that the financial hole can be filled by simply passing a law to demand that Congress make it so is utterly senseless — but it will be useful as a platitude for the coming campaign trail.
Polls are beginning to show that the Republicans are losing their reputation with voters for fiscal integrity. The president's latest proposal will only feed their new image as budget buccaneers.
http://www.nytimes.com/2004/02/0...l...rint&position=
I need sleep...
Joined: Jun 2002
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From: NH
I am not happy with the budget defecits of late. However there is not much in Bush's budget that I disagree with. The US got hit with a war at the worst possible time during a recession and the effects of which are still being felt. The two biggest contributors to the defecit are the increase in military spending as well as the tax cuts to jump start the economy...both of which I agree on. I guess what it boils down to in November is if you can live with a budget defecit now so that we can fight terrorism and jump start the economy or cut back on the money being spent to make America safer and roll the tax cuts back so that we can have a balanced budget or even a surplus. I know which side of the fence I am going to vote on.
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From: Newville PA
Yet more deception by our president. But, the American people are beginning to wake up.
At this moment, if every American sends a $25,000 check to the federal government we would be able to pay off the national debt. But that debt is growing by about 1.6 billion dollars every day.
I guess we could just leave that chore for our children and grandchildren. I am sure with the quality of education they are recieving they will be able to get good jobs over seas.
At this moment, if every American sends a $25,000 check to the federal government we would be able to pay off the national debt. But that debt is growing by about 1.6 billion dollars every day.
I guess we could just leave that chore for our children and grandchildren. I am sure with the quality of education they are recieving they will be able to get good jobs over seas.
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Originally Posted by DVPGSR
I guess what it boils down to in November is if you can live with a budget defecit now so that we can fight terrorism and jump start the economy or cut back on the money being spent to make America safer and roll the tax cuts back so that we can have a balanced budget or even a surplus. I know which side of the fence I am going to vote on.
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