[Homestead] The wonders of inumeracy, 2 + 2 equals 4, or 5, maybe 10

Tvoivozhd tvoivozd at infionline.net
Sun Sep 19 13:31:22 EDT 2004

latimes.com <http://www.latimes.com/>


  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 
eliminated, terminated."

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 
second-term agenda.

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 
Social Security."

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