PRESIDENT BUSH is using White House budget projections to disguise the reality of dismal fiscal news. This year's deficit will be the largest ever, and his tax cuts are responsible for much of the red ink.
In releasing the figures last week, the Office of Management and Budget said the $445 billion deficit expected for this year is $100 billion less than the projection in February. But many budget watchers at the time said the figure was too high. Even at $445 billion, the figure is $70 billion worse than last year's and represents 3.8 percent of the economy, a huge amount during a time of expansion.
Just 3 1/2 years ago, OMB was projecting a surplus of $387 billion for the 2004 fiscal year, which ends Sept. 30. Perhaps that figure was artificially high, a product of tax revenues flowing from the bubble economy. Bush sold his initial tax cuts as a way to absorb the excess revenue, not as an economic stimulus. With deficits expected far into the future, those cuts need to be reconsidered.
Deep within its latest report, OMB offers a breakdown of the causes of the turnaround from surplus to deficits in 2004. It attributes $216 billion to the Iraq invasion, homeland security, and other unforeseen expenses; $333 billion to revenue losses that had nothing to do with tax cuts, and $290 billion to the tax cuts themselves. Some revenue stimulation was necessary following the 9/11 attacks and the end of the Internet boom, but there was no need for the cuts to remain, producing deficits on this scale.
In his radio address Saturday, the president said, "Thanks to tax relief enacted since 2001, a family of four earning $40,000 a year now pays nearly $2,000 less in federal taxes." He picked just the right combination of income and family size to put the best gloss on his tax cuts. Single people or families with no children are getting a much smaller cut. He did not mention that a family of any size earning $1 million is paying about $38,000 less each year because of the cuts.
People in the $40,000 range deserve a tax cut to compensate for the higher costs of housing, fuel, and other necessities. But it is neither just nor sound policy to bestow massive tax cuts on the wealthy -- the economy grew strongly in the 1990s even though they were being taxed at higher rates.
"We must keep taxes low on Americans families and small businesses by making the tax relief we have passed permanent," Bush said Saturday. To keep the price tag of the tax cuts low, Bush and Congress decided to limit their duration. They will have to be reconsidered before the end of the decade.
The cuts are sapping the fiscal strength of the federal government now. Senator John Kerry is right that they need to be scaled back immediately before a $445 billion deficit becomes just another broken record.
Boston Globe
In releasing the figures last week, the Office of Management and Budget said the $445 billion deficit expected for this year is $100 billion less than the projection in February. But many budget watchers at the time said the figure was too high. Even at $445 billion, the figure is $70 billion worse than last year's and represents 3.8 percent of the economy, a huge amount during a time of expansion.
Just 3 1/2 years ago, OMB was projecting a surplus of $387 billion for the 2004 fiscal year, which ends Sept. 30. Perhaps that figure was artificially high, a product of tax revenues flowing from the bubble economy. Bush sold his initial tax cuts as a way to absorb the excess revenue, not as an economic stimulus. With deficits expected far into the future, those cuts need to be reconsidered.
Deep within its latest report, OMB offers a breakdown of the causes of the turnaround from surplus to deficits in 2004. It attributes $216 billion to the Iraq invasion, homeland security, and other unforeseen expenses; $333 billion to revenue losses that had nothing to do with tax cuts, and $290 billion to the tax cuts themselves. Some revenue stimulation was necessary following the 9/11 attacks and the end of the Internet boom, but there was no need for the cuts to remain, producing deficits on this scale.
In his radio address Saturday, the president said, "Thanks to tax relief enacted since 2001, a family of four earning $40,000 a year now pays nearly $2,000 less in federal taxes." He picked just the right combination of income and family size to put the best gloss on his tax cuts. Single people or families with no children are getting a much smaller cut. He did not mention that a family of any size earning $1 million is paying about $38,000 less each year because of the cuts.
People in the $40,000 range deserve a tax cut to compensate for the higher costs of housing, fuel, and other necessities. But it is neither just nor sound policy to bestow massive tax cuts on the wealthy -- the economy grew strongly in the 1990s even though they were being taxed at higher rates.
"We must keep taxes low on Americans families and small businesses by making the tax relief we have passed permanent," Bush said Saturday. To keep the price tag of the tax cuts low, Bush and Congress decided to limit their duration. They will have to be reconsidered before the end of the decade.
The cuts are sapping the fiscal strength of the federal government now. Senator John Kerry is right that they need to be scaled back immediately before a $445 billion deficit becomes just another broken record.
Boston Globe
