Bush Gravy-Trainers Will Trumpet Today's Deficit News, But ....
Yes, it has already started that anonymous posters here are trumpeting the good news contained in a story in today’s Times that federal corporate and upper income tax receipts are significantly ahead of projections this year, so much so that the nine-month deficit is down to only $251 billion. This is $76 billion less than the corresponding time period last fiscal year, and has led the anonymous poster to conclude that this will make Bush’s tax cuts permanent and help even more Republicans get elected in 2006, riding a wave of validation for Bush’s fiscal policies. Of course, the Bush supporters don’t want you to see the rest of the story.
For example, which tax receipts went up and why?
The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.
Most of the increase in individual tax receipts appears to have come from higher stock market gains and the business income of relatively wealthy taxpayers. The biggest jump was not from taxes withheld from salaries but from quarterly payments on investment gains and business earnings, which were up 20 percent this year.
That was similar, though much smaller than a sharp rise in tax revenue during the stock market boom of the late 1990's, which was followed by plunges in revenue when the market bubble burst. Oh, so it wasn’t as good as the 1990’s, when we had the Clinton tax structure in place and shrinking deficits, yet everyone and I mean everyone (not just the rich) was making money.
And with their bottom lines swelling over the last three years, why did corporate tax payments go up this year?
In addition, while a lot of the increase in tax revenue flows from the improving economy and higher incomes, part of the jump stemmed from a special factor: the expiration of a temporary tax break that allowed companies to write off their investment in new equipment much more rapidly than normal.
That tax break reduced revenue by about $61 billion in 2004, but it merely postponed taxes that companies would have to pay once their equipment was fully depreciated.And shouldn’t we be seeing this bump in revenuews anyway, since we are nearly four years into a recovery?
Critics of Mr. Bush's fiscal policies said the budget outlook seemed good only in comparison with the dire state of affairs a year ago. Given that the recession formally ended nearly four years ago and that overall growth has been quite strong for the last two years, they said, the budget ought to be in much better shape.
"It's only good if you set the bar at $400 billion," said Richard Kogan, a senior economist at the Center on Budget and Policy Priorities, a liberal research organization here. A $300 billion deficit, he said, was "really bad if you remember that we've recovered from a recession and you think we are at or near full employment."
Ah yes, the budget. Conservatives don’t want to mention the rest of the story, you know, the part about where all of this new revenue is going. Is it going into Main Street here at home?
Nope, it is getting swallowed by Iraq, Bush’s foreign policies, and soon by his Medicare corporate welfare. None of it is being spent on investments here at home, like new roads and infrastructure, improving border and homeland security, public health, expanding access to health care, growing new industries, energy independence, and expanding opportunities for students to go to college. Nor is it being spent on veterans, or even armor for our troops overseas.
Other financial hurdles may be down the road. Mr. Bush's intention to extend his tax cuts indefinitely, and to add new ones, would drain more than $1.4 trillion from government coffers over the next 10 years.
As the Medicare expansion into prescription drugs begins to take effect, the cost is estimated at about $33 billion in 2006, with increases every year after that. In 2015, the annual cost of the program is expected to be about $137 billion.
The immediate challenge is in the continuing costs of the war in Iraq, which are on track to cross the $200 billion level by the end of this year.
A much bigger problem is the impending retirement of baby boomers, with the oldest in that group eligible for Social Security payments starting in 2008.
Social Security's annual surpluses, which have been running around $150 billion a year, have been a major source of operating cash for the government. But those surpluses will start to decline before the end of the decade, and the program is expected to start running annual deficits in 2017.
The biggest fiscal threat of all comes from Medicare, the government's health care program for the elderly. Health costs are growing much faster than the economy as a whole, partly because of new technologies and drugs and partly because of the aging population.
But Bush doesn’t care about all this, and he will use this news to argue for making permanent his tax cuts, even though this news would argue that the wealthy and corporations are doing just fine and can afford to see a gradual increase in their taxes back to where they were when Bush came into office.
"Future presidents and future Congresses," said Senator Kent Conrad of North Dakota, the ranking Democrat on the Budget Committee, "are going to be faced with pressure to drastically cut Social Security and Medicare because of the decisions being made now."But that’s been the plan all along hasn’t it, Mr. Bush? It’s what you did in Texas, and now it’s what you’ll do here on a much larger scale: kick the can down the road to the next guy after watching the wealthy and your corporate check writers party and plunder at the expense of the rest of us for eight years. You’ll leave this country in far worse shape than you found it, no safer from terrorism, with a hollowed out society at home and far more vulnerable to energy terrorism and a fiscal meltdown.
And yet your supporters are already trumpeting this news as a great accomplishment.