Here's
another sentence in George Bush's State of
the Union address that wasn't true: "We will
not deny, we will not ignore, we will not
pass along our problems to other Congresses,
to other presidents and other generations."
Mr. Bush's officials profess to see nothing
wrong with the explosion of the national debt
on their watch, even though they now project
an astonishing $455 billion budget deficit
this year and $475 billion next year. But
even the usual apologists (well, some of them)
are starting to acknowledge the administration's
irresponsibility. Will they also face up to
its dishonesty? It has been obvious all along,
if you were willing to see it, that the administration's
claims to fiscal responsibility have rested
on thoroughly cooked books.
The numbers tell the tale. In its first budget,
released in April 2001, the administration
projected a budget surplus of $334 billion
for this year. More tellingly, in its second
budget, released in February 2002 ó that is,
after the administration knew about the recession
and Sept. 11 ó it projected a deficit of only
$80 billion this year, and an almost balanced
budget next year. Just six months ago, it
was projecting deficits of about $300 billion
this year and next.
There's no mystery about why the administration's
budget projections have borne so little resemblance
to reality: realistic budget numbers would
have undermined the case for tax cuts. So
budget analysts were pressured to high-ball
estimates of future revenues and low-ball
estimates of future expenditures. Any resemblance
to the way the threat from Iraq was exaggerated
is no coincidence at all.
And just as some people argue that the war
was justified even though it was sold on false
pretenses, some say that the biggest budget
deficit in history is justified even though
the administration got us here with cooked
numbers.
Some point out that Ronald Reagan ran even
bigger deficits as a share of G.D.P. But they
hope people won't remember that in the face
of those deficits, Mr. Reagan raised taxes,
reversing part of his initial tax cut.
Furthermore, this time huge deficits have
emerged just a few years before the baby boomers
start retiring and placing huge demands on
Social Security and Medicare. The Social Security
system is running a surplus right now, in
preparation for future demands; the rest of
the federal government is paying one-third
of its expenses with borrowed money. That's
a record.
But haven't administration officials said
they'll cut the deficit in half by 2008? Yeah,
right. I could explain in detail why that
claim is nonsense, but in any case, why bother
with what these people say? Remember, just
18 months ago they said they'd more or less
balance the budget by 2004. Unpoliticized
projections show a budget deficit of at least
$300 billion a year as far as the eye can
see.
The last defense of the budget deficit is
that it helps a depressed economy ó to which
the answer is "yes, but." Yes, deficit spending
stimulates demand ó but tax cuts for the rich,
which have dominated the administration's
economic program, generate very little employment
bang for the deficit buck. Of the 2.6 million
jobs the economy has lost under the Bush administration,
2 million have been lost since the 2001 tax
cut.
And yes, deficits are appropriate as a temporary
measure when the economy is depressed ó but
these deficits aren't temporary (see above).
Still, do deficits matter? Some economists
worry, with good reason, about their long-run
effect on economic growth. But I worry most
about America's fiscal credibility.
You see, a government that has a reputation
for sound finance and honest budgets can get
away with running temporary deficits; if it
lacks such a reputation, it can't. Right now
the U.S. government is running deficits bigger,
as a share of G.D.P., than those that plunged
Argentina into crisis. The reason we don't
face a comparable crisis is that markets,
extrapolating from our responsible past, trust
us to get our house in order.
But Mr. Bush shows no inclination to deal
with the budget deficit. On the contrary,
his administration continues to fudge the
numbers and push for ever more tax cuts. Eventually,
markets will notice. And tarnished credibility,
along with a much-increased debt, is a problem
that Mr. Bush will pass along to other Congresses,
other presidents and other generations.


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