Ignoring the deficits (cont.)

Author: Editorial

Published: October 3, 2003

Some members of Congress, Republicans and Democrats alike, seem to be having hissy fits over President Bush's request for an additional $87 billion to fund America's nation-building enterprises in Iraq and Afghanistan. At issue is not so much $67 billion that would go to support U.S. troop commitments in the two countries, but $20 billion that would be dedicated to the physical rebuilding of Iraq.

Congress, of course, should flyspeck Bush's request, especially the individual components of that $20 billion and how contracts are to be allocated. But the idea promoted by some lawmakers that this rebuilding money should be considered separately strikes us as shortsighted. Sen. John McCain (R-Ariz.) is right when he says that reconstruction in Iraq, particularly the job of getting basic services back on line, goes hand in hand with America's military posture on the ground and the Pentagon's ability to draw down the force there sooner rather than later. Artificially severing the two could do more harm than good.

Another apparent concern about the $20 billion is its impact on federal budget deficits, which is one reason a few lawmakers have proposed that the money be extended to Iraq as a loan, to be repaid over time with future oil revenue. This is a reasonable subject for debate because $20 billion isn't chump change.

But discussing this money in the context of spreading red ink in the government's accounts is more than a little disingenuous. First, its absence from the spending side of the federal ledger would do precious little to alter the government's increasingly bleak fiscal future. And second, it is Congress itself that has shaped that future with sins of commission and omission.

The non-partisan Congressional Budget Office has projected a gap between government revenue and spending of $480 billion for fiscal 2004, which began on Wednesday. That does not include the president's $87 billion, which Congress should and probably will approve. So put your mind around a deficit of $567 billion.

That's more than 5% of Gross Domestic Product, which would be reason for perspiring brows if there weren't so much unused capacity in the U.S. economy. But that capacity will be absorbed if the current growth in business activity continues and even accelerates.

The deficits, however, linger - a total of $1.3 trillion over the next decade. And that assumes no changes in the sunset provisions of the last tax cut bill, which requires nearly all elements to expire later this decade, starting in 2006. On the other hand, if the sunset provisions were eliminated and all tax changes made permanent, as some GOP leaders in Congress want, the deficit expands - to $4.6 trillion, according to an analysis by William Gale and Peter Orszag of the non-profit Tax Policy Center in Washington.

One more thing: The real deficits are masked by Social Security and Medicare surpluses. Without these and other retirement surpluses, Gale and Orszag project the 10-year deficit at $7.7 trillion.

Projections aren't facts, but they are the next best thing - and policy-makers, for once, ought to act based on them. That means thinking about the revenue side.

Yes, yes, spending restraint is necessary, but where, exactly? Non-military discretionary spending is less than 20% of the budget, Bush himself has proposed modest increases in the years ahead, and even flat-lining or, say, an across-the-board 5% cut would not yield much of a reduction in the deficit.

Then there is a terrible trinity - waste, fraud and abuse. Some government programs suffer from one or even all three of these blights, which ought to be nuked to oblivion. How much can be saved, though, is uncertain; a new report from the House Budget Committee identifies some areas for cracking down and says perhaps as much as $100 billion over a decade could be recouped.

In short, the president and Congress will need to design new tax legislation that addresses the deficit problem. Rolling back all the Bush tax cuts, as Democratic presidential candidates Howard Dean and Dick Gephardt want, should be a non-starter. But that still leaves plenty of room to trim the previous tax cuts, particularly for upper-income earners, and tilt against the deficit drain on the economy.

Lawmakers owe that to their children and grandchildren - and to yours.