[Homestead] The wonders of inumeracy, 2 + 2 equals 4, or 5, maybe 10
tvoivozd at infionline.net
Sun Sep 19 13:31:22 EDT 2004
THE RACE FOR THE WHITE HOUSE
Bush's Cut-and-Spend Plan Is Math-Challenged
Even allies say it would be nearly impossible to reduce the deficit
while expanding programs.
By Janet Hook and Warren Vieth
Times Staff Writers
September 19, 2004
WASHINGTON — To hear President Bush talk about his plans for a second
term, voters might think that the era of big government spending is back.
From his proposal to overhaul Social Security to his commitment to
fighting terrorism and his initiatives on health, education and job
training, the agenda Bush is spelling out in speeches and campaign
documents calls for the robust use of government money.
All this comes from the same candidate who promises to cut the federal
budget deficit in half by 2009 and whose Cabinet agencies are preparing
for some serious belt-tightening of domestic programs if he is reelected.
That mixed message — a smaller deficit, but costly new initiatives — may
have more appeal to swing voters than the simpler message of
old-fashioned conservatism, which calls for smaller government and less
But many analysts say Bush's second-term promises may be a poor
predictor of what he could actually accomplish. Even some administration
allies say it would be nearly impossible for Bush to achieve all his
ambitious objectives and still halve the deficit by 2009.
"Can it be done?" said G. William Hoagland, top budget aide to Senate
Majority Leader Bill Frist (R-Tenn.). "Sure. On paper. But politically
it's very difficult."
To do it all, Hoagland said, "lots of other things would have to be
The result: Unlike Bush's 2000 campaign platform — whose major elements
of tax cuts, school accountability and prescription drug subsidies for
the elderly were enacted — his 2004 promises may have to be sharply
scaled back or abandoned if he wins a second term.
Bush has made a big issue of arguing that Sen. John F. Kerry's health
and education campaign promises do not square with his promise to reduce
the deficit. Bush argues that his Democratic rival would have to raise
taxes or add to the deficit to enact his spending plans.
But if he wins reelection, Bush will have tough choices of his own. Some
analysts predict that much of his agenda would wither if he achieved
what seemed to be his top priority: making permanent the tax cuts
enacted in his first term. Doing so would cut government revenue by more
than $1 trillion between 2005 and 2014.
"The one sure thing that will happen if he becomes president is the tax
cuts will be permanent," said Mark Zandi, chief economist at
Economy.com, a forecasting company in West Chester, Pa. "That will
result in large, persistent budget deficits, so he will not be able to
follow through on his other pledges."
Bush has repeatedly pledged that in five years, he would halve the
deficit — measured as a share of the U.S. economy — from this year's
expected peak of $521 billion, which amounts to 4.5% of the gross
national product. That means Bush is aiming for a deficit of about $260
billion, or 2.25% of the GNP, in 2009.
But that goal may already be out of reach, according to the latest
figures from the nonpartisan Congressional Budget Office, which provides
economic analysis to Congress. Unless current tax and spending policies
change, the CBO projects that the deficit will be about $312 billion in
Chad Kolton, a spokesman for the White House Office of Management and
Budget, disputed the CBO's estimate, saying it assumed a higher
long-term level of spending for operations in Iraq and Afghanistan than
was reasonable. On the other hand, the CBO figure does not include the
costs of making Bush's tax cuts permanent or other elements of his
Even many Republicans are skeptical that Bush can — or will try
particularly hard — to stick to his deficit reduction promise, because
it probably would require a level of spending restraint with no
precedent in modern times.
"I don't think he's that philosophically committed to deficit reduction
if it involves politically painful choices," said Steve Moore, president
of the Club for Growth, a Washington political group that advocates for
lower taxes and smaller government. "He hasn't talked about any program
he would want to cut."
The only part of the budget easily controlled every year by Congress and
the president is discretionary spending, which covers programs from the
Pentagon to school aid to law enforcement. The cost of mandatory
programs — such as Medicare, welfare and food stamps, which pay out
benefits to anyone who is eligible — can be changed only if Congress
alters those programs' basic structure.
White House budget plans call for cutting overall funding for
discretionary spending, other than for domestic security, by about 12%
over five years, according to an analysis by the Center on Budget and
Policy Priorities, a liberal research group in Washington.
The group's analysts say that even bigger domestic cuts will be required
if the plan is adjusted to reflect additional tax and spending
initiatives Bush has endorsed but did not fold into his budget. These
include spending on defense and anti-terrorism efforts and cuts in the
alternative minimum tax — a tax intended to keep the wealthy from
sheltering all their income. It increasingly is applying to — and
raising taxes on — middle-income individuals.
"We'd be talking about a 25% to 30% cut" in domestic programs, said
Richard Kogan, a senior fellow and budget expert at the center. "There's
no precedent for that in the postwar period. It's just not realistic to
think anything like that is going to happen."
A glimpse of what could be in store in next year's budget was provided
in an Office of Management and Budget memo, leaked this year, that set
stringent spending targets for federal agencies and departments as they
began planning their budgets for fiscal year 2006, which begins Oct. 1,
2005. The memo sets targets below 2005 spending levels for a wide range
of domestic programs: a 2.6% cut in education, a 3.1% cut in veterans'
affairs and a 1.9% cut in the Environmental Protection Agency.
Kolton, the OMB spokesman, described the memo as a routine document
giving agencies preliminary guidance as they began their budget
planning, and said it did not reflect where the budget would end up. But
Democrats contend it is a window onto what it would take to meet Bush's
deficit-reduction goals without raising taxes.
Many analysts think that persistent budget deficits will also put a
damper on Bush's ability to win approval of an overhaul of Social
Security — a program that, starting in 2019, is expected to pay out to
retirees more than it collects in taxes from workers.
Bush has not put forward a specific plan, but has said he wants to give
workers the option of investing part of their Social Security payroll
tax in private accounts — an approach many think could save money by
harnessing the power of the stock market to provide equal or better
returns to workers than the government trust fund investments.
Independent analysts, including the CBO, have estimated that it could
cost at least $1.5 trillion over 10 years to make the transition to the
new system, because the program would continue to pay benefits at
current levels even as some younger workers diverted their payroll taxes
to private accounts.
Bush campaign aides say those costs will be far outweighed by the
long-term savings they expect from changing the Social Security system.
But to make that case to Congress, Bush will have to overcome lawmakers'
tendency to make decisions based on the short-term.
"When the savings materialize in 2040, we will all be dead," said Robert
Reischauer, a budget expert and president of the Urban Institute, an
economic and social policy research center in Washington. "We live in
the present and borrow in the present."
Bush has proposed initiatives in health and other domestic programs that
his campaign estimates will cost about $73.4 billion over 10 years. They
include tax incentives for individuals to establish tax-sheltered health
savings accounts, as well as expanded college scholarships and aid to
economically distressed communities.
It is not clear how hard Bush would push for those initiatives, or how
receptive Congress would be. Even now, some administration priorities
have run into resistance in the House, where many conservatives are
restless about the rise of government spending under Bush.
Appropriations bills passed by the House in recent weeks shortchanged
administration requests for more aid to community colleges, an
initiative on space exploration, a foreign aid program for emerging
democracies and an arts initiative promoted by First Lady Laura Bush.
Bush's domestic spending initiatives are a drop in the bucket compared
with his ambitious tax policy agenda, which doesn't end with extending
his tax cuts.
He has proposed several tax-sheltered accounts to encourage saving. The
short-term cost to federal coffers are expected to be relatively modest
— $5.6 billion over 10 years, according to the Bush campaign — but the
cost is expected to be far greater in the future, when people start
withdrawing money from these accounts. An analysis by the Urban
Institute-Brookings Institution Tax Policy Center estimates that the
revenue losses could eventually run $35 billion a year.
Bush has called for an overhaul of the tax code to make it simpler and
fairer, and promises to appoint a commission to study the idea. But tax
overhaul is a notoriously difficult idea to turn from campaign rhetoric
to legislative reality.
Grover Norquist, a conservative strategist and president of Americans
for Tax Reform, predicted that the fate of Bush's second-term agenda
would hinge on whether the election gives the Republicans a bigger
margin of control in Congress.
"He will move as quickly toward fundamental tax reform as the makeup of
the House and Senate will allow," said Norquist. "It's the same with
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