I'm staring at a block of paper, roughly 9 x 12 x 4 inches, that is the Budget of the US Government for Fiscal Year 2005. I do not claim to have mastered all of its deceptions, which culminate in the claim to cut the deficit in half by 2009, but some of the egregious crimes of accounting are visible on the surface.
This is not a serious or honest budget. In fact, it is not a budget at all. It's a political infomercial dedicated to George Bush's reelection.
To begin with, the Budget continues the Bush administration's innovation of truncating the projection period to five years. A serious budget would attempt to go further, particularly since the retirement of the Baby Boom will be hugely relevant to fiscal policy. Other reasons to look further down the line are the assortment of grand plans the White House has announced that imply very large costs in the future.
It is interesting to note that assorted right-wing types want to calculate the present value of, say, Social Security obligations to all future beneficiaries, from now till The End of Time. But when it comes to ambitious, expensive initiatives from this White House, the future is now.
What am I talking about?
We have the determination to build a missile defense that does not necessarily work. They call it the "test and fix" approach. There is some research and development money for that in the budget, but no cost of building the thing.
We have the proposed mission to Mars.
Then there is the great Social Security privatization project. Diversion of payroll taxes into private accounts is not reflected in the budget's revenue projections.
How about the costs of Empire? There is nothing for whatever further exercises in liberation and nation-building are in store for the Middle East.
Another big-ticket item is fixing the Alternative Minimum Tax so that inflation does not expand its coverage to the non-rich. Nothing in the budget for that, beyond a "patch" for 2005.
Alongside the exclusion of future costs, there are some problematic devices that gain revenues (don't call them tax increases). One is prospective proceeds from drilling for oil in Alaska. Another is auctioning off the broadcast spectrum. A third is a crackdown on tax shelters. These have been proposed in the past. It is one thing to write these into a budget and make your numbers look better. It is another to actually do them.
On the tax side, we have an exercise in collecting tax revenue at a discount to the taxpayer. The proposal is to eliminate individual retirement accounts based on deductible contributions/taxable withdrawals in favor of "Roth IRAs" wherein contributions are made with after-tax dollars and returns to the investment are tax-free. The rollover incurs tax revenue in the short term (i.e., within five years), and revenue losses in the long term. The Roth IRA treatment of savings is analogous to that of the flat tax.
Finally, the budget assumes slower economic growth than CBO for 2005, and faster growth thereafter. By pure coincidence, this has the effect of raising deficit estimates for 2005 and reducing them later on, making it easier "to cut the deficit in half by 2009."
In aggregate terms, the budget proposes nearly zero growth in domestic discretionary spending. But remember, in past years Bush has always lowballed spending proposals. Afterwards he signed off on whatever the Congress did. This will be evident before the election, since the Congress will want to finish their work so they can go home and commence to lying to their constituents about this, that and the other thing.
So we will go into the election with the president claiming to support fiscal discipline, after pursuing a fiscal policy -- fomenting tax cuts and acquiescing to spending growth -- that has blown the 1990s surpluses to smithereens. The president will blame Congress for overspending, even though he has signed all of their bills and is likely to do so this year as well.
If they are dumb, the Democratic candidates will wail about budget deficits, even though nobody cares about deficits until they have visible, serious financial market repercussions. A better platform is to pledge a recasting of the tax cuts into progressive form, a reasonable deficit-control goal and well-motivated ideas for public investment in the nation's future. In other words, a platform fit for Democrats, as opposed to Eisenhower Republicans.
Max B. Sawicky is a senior economist at the Economic Policy Institute (although the opinions here are his own), a member of the National Executive Committee of Americans for Democratic Action and the author of the "MaxSpeak" weblog at maxspeak.org/mt.