Monday, December 20, 2004

About that Deficit, Mr. President....

Today George Bush reiterated his pledge to cut the deficit in half within five years. Even overlooking the Bush administration's track record on deficit reduction, there's still little reason to assume that this promise is going to be anything like fulfilled come 2009. In the same speech, Bush later explained that his "tough budget" would "provide every tool and resource to the military," while meeting his other priorities: tax reform (i.e. revenue-neutral but rather regressive changes in the tax code - eliminating business tax breaks for employer-provided health insurance, for example) and "improving achievement in public schools."

So it looks like Bush is trying to pull off the difficult trick of slashing $200 to $250 billion from our deficit while keeping constant, if not increasing, federal defense and educational spending. Since federal tax revenues are staying right where they are - "at their lowest level, measured as a percent of GDP, since 1959" - it seems the only ways Bush could live up to this promise are through massive and unappealing cuts in virtually all elements of discretionary spending, some gimmicky changes in how the Social Security budget is counted, or a combination of the two. Or he could just ignore the problem entirely, seeing as how he has ambitiously set the year after he retires as the target date for returning the deficit to what would still be historically large levels. Options, options...


At 1:54 PM, Blogger Chris said...

A few links that are related to Nick's post:

Today's WaPo has a very interesting story on the Federal Page:

GAO Finds Fault with the Federal Books It comes as quite a surprise to me that the GAO has been unable to provide a complete financial picture of the government for the past eight fiscal years. However, the most salient part of this story is certainly the following paragraph:

"As of September, the government's debt was $7.4 trillion -- or about $25,000 for every adult and child in the country, Walker noted. If one factors in other unfunded commitments that are not included in that number -- such as promised Social Security and Medicare benefits and veterans' health care -- the debt burden works out to about $145,000 per person, or $350,000 per full-time worker."

Also in today's WaPO, Richard Cohen slams Bush's privatization plans and echoes the sentiment of my earlier post:

"Similarly, to ensure that Americans approaching retirement will get the benefits they were expecting and at the same time divert money into personal retirement accounts, about $2 trillion will be borrowed. For some reason, this additional debt will not become a burden to any one of us nor, for the same mysterious reason, will it affect interest rates or be noticed by the very people who have been driving down the value of the dollar. This is as certain as finding weapons of mass destruction in Iraq."

Cohen also makes a very good point that there is little to no evidence that private management of funds ensures equitable or even better returns. While his airline analogy may not be the most accurate, it is still an important point that it is a big idealogical assumption that somehow private accounts can magically do much better than the current program.

Meanwhile Robert J. Samuelson reminds me that we should also be talking about Medicare alongside the Social Security debate (which are of course both inextricably linked with our national debt.)

At 2:16 AM, Blogger Nick said...

Thanks for the links, Chris. Picking up on that Samuelson article, I'd like to acknowledge that the coming Medicare debt is every bit as big a problem as that posed by Social Security - if not more so - but it seems to me at least to be a considerably more complicated one. Social Security, after all, is more or less an exercise in accounting. Discussions of Medicare take pretty much every issue relevent to Social Security and throw in America's current healthcare dilemmas (the large numbers of the uninsured, spiraling malpractice premiums, domestic overcharging on the part of US drug companies, etc), which are considerably messier. I think this complexity is one of the big reasons why politicians - and, yes, bloggers like myself - prefer to talk about Social Security than about Medicare.


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