Avoiding the Budgetary Bait and Switch
Bruce Bartlett is critical of the Bush administration's cut taxes, spend, and claim it pays for itself policy:
Debts and deficits, by By Bruce Bartlett, Commentary, Washington Times: On Oct. 11, George W. Bush went before the television cameras to proudly announce the budget deficit for fiscal 2006 ... was only $248 billion. This was a great success, he said, because in February the Office of Management and Budget had estimated the deficit would be $423 billion.
If this is the standard for success, one wonders why we didn't do even better. All Mr. Bush had to do was order OMB to make an even bigger mistake... If it had wrongly projected the deficit to be $500 billion or $600 billion in 2006, then Mr. Bush could have announced an even bigger improvement...
In the real world, of course, people measure progress not against some incorrect forecast but against actual results. By this standard, the numbers don't look as good. Mr. Bush inherited a budget surplus of $128 billion in fiscal 2001.. By the following year, fiscal 2002, the surplus was gone and the government had a deficit of $158 billion, which rose to $378 billion in 2003 and $413 billion in 2004, before falling to $318 billion in 2005 and $248 billion last year.
But these figures greatly understate the budgetary turnaround. In January 2001, the Congressional Budget Office (CBO) estimated budget surpluses as far as the eye could see. It projected an aggregate surplus of more than $2 trillion between 2002 and 2006. Instead, we had an aggregate deficit of $1.5 trillion -- a deterioration of $3.5 trillion.
Yet these figures still understate the budgetary damage caused by the Bush administration because it leaves out changes in the budgetary status of entitlement programs such as Social Security and Medicare. ...
Over the next 75 years, these two programs have an unfunded liability of $44 trillion -- $15 trillion for Social Security and another $29 trillion for Medicare.
What is really frightening is that Mr. Bush apparently has no clue the problems of Medicare are twice as bad as Social Security's and are worsening much faster. At the end of fiscal 2002, Social Security's unfunded liability was $11 trillion and Medicare's was just $13 trillion. Today, Social Security is a little worse, but Medicare is much, much worse.
Yet over and over again, Mr. Bush has said we must fix Social Security -- even if we have to raise taxes -- while saying nothing about the way Medicare is hemorrhaging money. He can't because his massive, unfunded program for prescription drugs in 2003 is the principal reason Medicare's financial problems have gotten so much worse since 2002.
Medicare is the biggest worry, no disagreement there. But before we begin using the deficit as a reason to begin slashing valuable social programs, remember that we've had higher debt to GDP ratios in the past and survived. The worry is the future and very specifically, as noted above, Medicare payments are the biggest concern. Thus, getting our health care costs under control is an essential step in bringing the budget into balance.
In light of that, we should be careful to avoid a bait (reducing the deficit) and switch (from solving the health care problem to cutting other social programs) on this issue, particularly since the deficit was enhanced by ill-advised tax cuts.
[Health care has been a topic of much recent discussion, e.g. from yesterday see Ezra Klein, Going universal, Commentary, Los Angeles Times and Raging Lefty Watch, by Daniel Gross. On taxes, I don't oppose revenue neutral changes designed to minimize economic distortions and promote fairness. But that's not what we got.]
Posted by Mark Thoma on Wednesday, December 27, 2006 at 01:14 AM in Budget Deficit, Economics, Health Care, Policy, Social Security, Taxes |
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