Any fiscal conservative Republican will tell you the same. Bush's tax cuts and huge deficits are threatening the future of America. This idiot has no idea what he's doing in the office. He's led by the nose by corrupt corportate shills (does anyone still doubt that Cheney and Halliburton are NOT fused at his pacemaker?) with no interest in upholding a democracy in our country when there's a buck to be made.


May 23, 2004
Talking Deficits

A few weeks before the fall election, President Bush is likely to claim a victory, of sorts, over the budget deficit. The good news will be based on October data from the Office of Management and Budget in the executive branch, which, according to widespread estimates, will show red ink of $420 billion to $450 billion at the end of the 2004 fiscal year. When the year started, the budget office had conveniently projected a deficit of $521 billion. Hence, a bookkeeping triumph.

The administration would like to turn the budget deficit into a nonissue in the presidential campaign. But it deserves to be one of the central talking points, even more than it was in 1992, when Ross Perot rightly convinced the nation that deficits were threatening American prosperity.

The Bush deficit is worse than the administration says. And it appears that coming deficits will be worse than previous ones in terms of the impact on Americans' financial security and on national security, for these reasons:

¶ Size. Though the Bush deficit of 2003 was already a record in pure numbers, the administration's defenders often point out that it amounted to only 3.5 percent of gross domestic product. That doesn't sound too bad compared with the modern record of 6 percent set by President Ronald Reagan in 1983. But the size of the deficit now is masked by the Social Security Trust Fund surplus. If you believe that the Social Security surplus would be put to better use by being preserved for future retirees, the Bush deficit should really amount to 5 percent of G.D.P.

And it shows no signs of abating. It took 15 years of hard work and good luck before the Reagan deficits were vanquished. Even Mr. Reagan himself, after initially cutting taxes, raised them repeatedly. Mr. Bush shows no such intention, and that is the reason the current red ink he has unleashed will not stop flowing.

According to former Treasury Secretary Paul O'Neill, Vice President Dick Cheney swatted back questions about the tax cuts by saying, "Reagan proved deficits don't matter." Mr. Reagan's own actions, and the political careers of many politicians since then, prove otherwise.

¶ Cause. The current deficits are unique in the degree to which they appear to be driven by tax cuts. That is terribly important because it shows that they are in large part a result of deliberate policy decisions, not unforeseen events. Last year, after two rounds of Bush tax cuts, taxes fell to a percentage of the economy not seen, even in the deepest recessions, since 1955. In 2004, they are estimated to come in at just over 16 percent of G.D.P., a level last seen in 1951. Even if the economy recovers fully, the country would have to revert to a 1957-era government to break even. In 1957, the Interstate System was just getting under way, and Medicare did not exist, much less a war on terrorism.

¶ Timing. President Reagan's deficit binge occurred decades before the baby boomers' retirement. This one is taking place on the eve. To use an analogy, President Bush's deficits are putting the nation in the position of a couple who take out a long-term mortgage just before retirement.

That's a travesty, because reducing the buildup of government debt is the key to strengthening Social Security. Social Security payments currently soak up about 4 percent of G.D.P. They are projected to rise to a bit more than 6 percent by the mid-2030's. Long before that, however, the Bush tax cuts will crimp incoming revenues by over 2 percent of G.D.P.

In other words, if the tax cuts are not made permanent, as Mr. Bush intends, the revenue from those taxes would cover the increased cost of Social Security, without reducing benefits. (Even in fantasy, no one has yet come up with a way to pay for Medicare.) Clearly, we could not have picked a worse demographic moment to be borrowing money on the next generation's credit.

¶ Foreign Dependence. Over the last few years, an unprecedented 80 percent of the deficit has been financed by foreign governments, institutions and individuals, mainly in the Far East. Over all, 37 percent of United States public debt is in foreign hands, up from 14 percent at the peak of the Reagan deficits in 1983.

A greater reliance on foreign creditors creates further economic instability, as nations like Argentina have found out the hard way. Debt is debt, to be sure, leading ultimately to a smaller economy than would otherwise be the case.

But debt owed to foreigners is more likely to affect the value of the dollar, and foreign capital is more nomadic, leaving the United States vulnerable to the whims of central bankers in Beijing and Tokyo.

But even if a sudden catastrophe never materializes, a slower one is already in the making. It is important that voters talk seriously about deficits in this political season.



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