Tuesday, July 11, 2006

W's Deficit Bullcrap

Today the Dissembler-in-Chief announced that the budget deficit for the current fiscal year will come in well below projections.

Instead of another whopping deficit of nearly $400 billion, we will have a deficit of "only" $300 billion this year.

Oh joy!! It's a sad state of affairs when this counts as "good news."

Of course, Bush and the GOP are trumpeting the revised figures as evidence that their tax cuts "worked", i.e., that they pumped the economy up so much as to increase tax collections.

Let's examine this flawed logic. In 1993, after years of Reagan/Bush I deficits, Congress passed a small tax increase proposed by then newly inaugurated President Bill Clinton. That was followed by an enormous economic expansion and a huge increase in tax revenues--mostly from the larger economy, rather than the tax increase itself--that wiped out the deficit and produced a decent surplus.

In the 2000 election, Al Gore proposed devoting part of the surplus to a modest, middle class tax cut; he would put the rest in a "lock-box" for use in future years as social security and Medicare obligations grow with an aging population.

Oh no, said Bush and his cronies. Let's pass a big tax cut aimed primarily at the wealthiest 10 percent of the population, and let's make it bigger than the surplus--guaranteeing we'll have another deficit. And sure enough, the surplus engineered by Clinton disappeared before the first year of W's mismanagement of our government.

So what we got after 2000 were enormous deficits--financed by everybody--while a precious few rich folk got large tax cuts. The economy responded sluggishly, taking probably longer to recover than from a typical recession.

Finally, after five years, the economy is growing at a good clip again (it would have done so regardless of the Bush tax cuts, which did little for most people). It is growing particularly well at the top--among those who were beneficiaries of those tax cuts. Corporate profits are up and so are capital gains on investments. So tax revenues are on the rise, as they were in the 1990's (after a tax increase).

The only problem is that this time we're STILL running a huge deficit--$300 billion folks--and the CUMULATIVE deficit under W is something like $1.5 TRILLION. And the only goal Bush has set before he leaves office is to "cut the deficit in half." (As if it he had inherited a huge deficit and whittled it down, rather than created it himself.)

Now, imagine if instead we were $1.5 trillion to the positive (or more), and had devoted the surplus to Medicare and social security. Then, our country would be in decent shape--we could even have adopted a good Medicare drug plan, instead of one designed by the drug companies to benefit themselves.

But that's not the case. In coming years we face some tough choices if Congress can ever come to grips with our real problems, instead of imagined issues like flag burning. Interest rates are rising, which means the debt service on the accumulated debt of the borrow and spend Republicans will grow exponentially in coming years.

Unfortunately, long after W is gone (and hopefully remembered in the same breath as Calvin Coolidge and Warren Harding) the rest of us will still be paying for his reckless fiscal policies.

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