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Sunday, May 08, 2005

Robert Samuelson: Gone is Shame About Overspending or Undertaxing

The call for political accountability for the state of the federal budget is getting louder. Robert Samuelson makes the case in this article from Newsweek:

A Deficit of Seriousness, No one in Washington—Republican or Democrat—is trying to balance the budget. Gone is shame about overspending or undertaxing, By Robert J. Samuelson, Newsweek, May 16 issue: Every two years, the congressional budget Office publishes a fact-filled report entitled "Budget Options. … The report is (unfortunately) a waste of money. It has no audience. There's no one in Washington—no one with any power—trying to balance the budget. President George W. Bush's budget did not ever envision reaching a balance. The Republican Congress's new budget resolution purports to halve the budget deficit by 2010 but does so only on the basis of optimistic assumptions. In floor debate, the Democrats never offered a realistic balanced budget. The closest they came was in the House, where they promised balance by 2012. But that happens only by assuming that all of Bush's tax cuts expire in 2011—a position that even many Democrats reject.

Balancing the budget is simply too much trouble. It requires asking unpopular questions about who deserves help, which government programs actually work—and how to pay for the rest. … But no one wants to incur the bad publicity of taking away anything from anyone. Government programs, once created, become virtually immortal. … In this debate, there is no high moral ground. To critics, the Republican budget strategy is "starve the beast"—cut taxes and use the resulting deficits as an excuse to squeeze spending. Agree or disagree, that's principled; it's a means to an end (smaller government). In practice, the real Republican strategy is more cynical—cut taxes and feed the beast. As a share of national income, federal taxes in fiscal 2004 were 16.3 percent, the lowest since 1959. Meanwhile, budget increases go well beyond defense and homeland security. Even excluding these categories and "mandatory" programs (Social Security, Medicare, etc.), federal spending has risen 4.8 percent a year (after inflation) under Bush, estimates Stephen Slivinski of the Cato Institute. That's the highest rate, he says, since Richard Nixon. In 2003, Bush proposed and Congress approved the biggest new spending program since Lyndon Johnson, the Medicare drug benefit. It was all deficit financing; there was no new tax for any of it.

Gone is any sense of shame about overspending and undertaxing. ... Bridging that gap would require Republicans and Democrats to do what neither wants—scrub government of less useful spending and then raise taxes. Democrats prefer to deplore Republican "irresponsibility." Republicans prefer to tax less and spend more. The resulting deficits aren't an economic calamity; if they were, they'd quickly be eliminated. But they preserve too many unneeded programs and allow interest payments on the growing federal debt to creep up. Both will make it harder to cope with rapidly rising retirement spending for aging baby boomers. A serious nation would prepare for that, but we have a deficit of seriousness.

I would quarrel with the implication that Democrats deserve a large share of the blame for the current state of the federal budget. On this point, see Brad DeLong’s discussion here which gives strong evidence to the contrary.

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    Posted by on Sunday, May 8, 2005 at 11:25 AM in Budget Deficit, Economics, Press | Permalink  TrackBack (0)  Comments (0)

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