Tuesday :: Sep 7, 2004

Bush Breaks The Bank With His Budget Deficits

by Steve

The Congressional Budget Office released a revised ten-year deficit projection today that predicts cumulative deficits of nearly $2.3 trillion over the next ten years, at a time when the baby boomers will begin tapping into Social Security and Medicare at higher and higher levels. The CBO projection today is higher than their estimate jus this past March, when using the same economic models in place now the CBO projected a ten-year deficit of $2 trillion. Yet even this deficit estimate is grossly understated, as it does not include future defense, Iraq, and Afghanistan costs, as the Center for Budget and Policy Priorities (CBPP) noted this morning. The CBO estimate also assumes that Bush’s tax cuts won’t be renewed to some degree, which we already know is politically problematic.

The CBO revised its current-year deficit figure to $422 billion, which was in line with what it and the CBPP estimated it would be back in August. Earlier this summer, Bush’s Office of Management and Budget, losing credibility with every week, projected a current-year deficit of $445 billion, a figure that the CBPP said was set by the Bush Administration to be deliberately overstated so that the OMB could claim false progress on the deficit when these figures came out.

As proof for the CBPP suspicions, congressional Republicans immediately hailed the “progress” in reporting a $422 billion deficit, which was $55 billion below the deliberately overstated figures from the Administration earlier this year.

Focusing on a $55 billion improvement since the budget office last estimated this year's shortfall in March, Republicans hailed the figures as good news.

"The CBO estimates show exactly the same trend" that the White House projected last month, said White House budget office spokesman Chad Kolton. "The president's tax relief is working, and the strengthening economy is helping to bring down the deficit in 2004."

"This report underscores that our policies are working to create a stronger economy, more jobs and a lower deficit," said House Budget Chairman Jim Nussle, R-Iowa.

Kinda like focusing on putting out the garage fire while your house has burned down, right Nussle, you lying twit?

But the real story in all of this, besides the White House/GOP deception on the budget, is that as CBPP says, Bush has managed in three short years to create a large structural deficit in the federal budget that will amount to cumulative deficits of over $4 trillion in the next ten years, deficits not caused by the 2001 recession, the costs of the war on terror, or Bush’s crusade to bring God to the world while bankrupting us here at home. These structural deficits will be caused by Bush’s intentional revenue shortfalls.

Some tax-cut advocates continue to claim that the deficit problem is caused primarily or exclusively by spending increases. The CBO data show this is not the case; as just noted, the tax cuts enacted since the beginning of 2001 have contributed more to the deficit than the spending increases. The CBO data also show that federal spending in 2004, measured as a percentage of the economy (i.e., of the Gross Domestic Product), is slightly below its average level of the last four decades. The deficits thus cannot be said to be due to unusually high levels of spending.

What the data show instead is that the emergence of large deficits stems largely from a stunning drop in revenues. The CBO data indicate that federal tax revenues this year will be at their lowest level, measured as a share of the economy, since 1959. (Under CBO’s projection of last spring, revenues this year would have been at their lowest level, as a share of the economy, since 1950.)

The 2004 deficit of $422 billion reveals a budget in much worse shape than CBO projected in early 2001. At that time, CBO projected a surplus in 2004 of $380 billion.[3] As can be seen, the actual result for 2004 is $800 billion worse than projected in 2001. Nor is this result peculiar to 2004: over the ten-year period from 2002 to 2011, our current projections are about $870 billion worse on average each year than the projections issued in early 2001, or $8.7 trillion worse over the decade as a whole.

Calculations based on CBO and Joint Tax Committee data show that of the $8.7 trillion deterioration over the 2002-2011 period, a substantial majority is attributable to tax cuts, defense funding increases, and domestic program increases enacted by Congress. (The rest is due to economic or technical factors.) Tax cuts account for the majority of the deterioration that is due to the actions of policymakers. In other words, the tax cuts have increased the deficit more than all program increases combined.

Although CBO’s official projections show deficits declining over the next ten years, to $65 billion by 2014, CBO notes that its official projections do not reflect the costs of extending the tax cuts beyond their scheduled expiration dates. As CBO director Douglas Holtz-Eakin testified in July, “...baseline revenue projections are made less reliable by the existence of expirations that few people expect to occur as written in current law.”[2] In addition, while CBO’s projections overstate likely future costs of military operations in Iraq and Afghanistan, they otherwise include defense levels well below the levels that CBO estimates are needed to fully fund the Administration’s official multi-year defense plan.

CBO’s new report and other CBO documents include additional estimates indicating that if the tax cuts are continued and the defense funding levels assumed in the budget projections are adjusted to assume that the costs of operations in Iraq and Afghanistan phase down but the Administration’s multi-year defense plan is fully funded, projected deficits will not fall below $335 billion in any year, will average $440 billion per year over the next decade, and will total approximately $4.4 trillion over the ten-year period.

Please ignore the garbage from our GOP friends about these deficits coming from the short 2001 recession, 9/11, the war on terra’ or even Social Security/Medicare. The real cause of these crippling out-year deficits is Bush’s intentionally-engineered reduction in federal revenues.

Steve :: 12:19 PM :: Comments (5) :: Digg It!