The voices of Tax Policy Center's researchers and staff
President Bush and the Congress are going to spend much of the next three months in an ugly cage match over $21 billion in spending. While $21 billion is real money by anyone's definition, the energy they will expend on this largely symbolic fight could be put to much better use. They could, for instance, use the time to look seriously at where the real money is—entitlements and an increasingly out-of-whack tax code.
From now to Christmas, both sides will insist that the fiscal fate of the nation lies with this $21 billion. The President is calling for a "fiscal showdown" and argues that he must veto a series of bloated money bills to keep an out-of-control tax-and-spend Congress in check. Democrats will respond that the President is crushing programs dear to the middle class.
In truth, the outcome of this fight will barely matter at all in overall budget terms.
What is $21 billion? It less than 1 percent of total expected federal spending for the current fiscal year, and less than 0.2% of Gross Domestic Product. It is, in other words, a rounding error in the multi-trillion dollar world of budgets.
While they have their symbolic squabble, what are Congress and the President not going to do? They are not going to make fundamental changes to Medicare, which will cost $456 billion in fiscal year 2008. Nor will they do anything about Medicaid, which is expected to cost the federal government $209 billion in FY '08, or Social Security, which will cost $612 billion. Yet, the pols all know that no long-term fiscal reform is possible without addressing all three massive entitlements, which represent half of the entire budget.
There are two proposals floating around Capitol Hill that might help fix the entitlement problem. Senators Kent Conrad (D-N.D.) and Judd Gregg (R-N.H.) have proposed a new bi-partisan commission that would lay out major changes to these programs soon after the 2009 elections. Representatives Jim Cooper (D-Tenn.) and Frank Wolf (R-Va.) have introduced a a somewhat different version of the same idea. Passage of either is a long-shot, however.
Also off the table is any serious discussion of taxes. Sure, there will be some battles around the edges over issues such as how to tax carried interest received by the general partners in private equity firms, and whether to raise the tobacco tax to pay for an expanded children's health program. In its only really big dollar decision, Congress will continue to exempt millions of middle class voters from the dreaded Alternative Minimum Tax. Congress will do this, and very likely not pay for most of it, with little debate
There is nothing wrong with Bush and congressional Democrats having a healthy argument over $21 billion in spending priorities. But by bogging down in a months-long debate over little else, Washington will be doing us all a disservice. Despite what the politicians say, this year's budget wars will be yet another opportunity to avoid confronting the nation's real fiscal issues.
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