Simple economics elude budget drafters
by Georgie Anne Geyer

In the version just presented by President Bush, we have a $2.4 trillion budget for next year, which sees a parallel rise in the federal deficit to $521 billion, of which the Bush tax cuts account for $272 billion.

This does not include additional funds for Afghanistan, Iraq or other military adventures. Those are to be dealt with, as earlier surreptitious war costs, in a hidden $50 billion supplementary request to Congress. This budget also reduces 65 federal education and social programs of the sort that President Bush, when he was governor, seemed so enamored of.

What's more, the latest report from the Congressional Budget Office reports that over the next decade, the deficit is expected to go up to $2.4 trillion, which the New York Times reports as almost $1 trillion more than the prediction of only six months ago.

How does one reconcile such a looming deficit when, remember, we had a comfortable surplus? The White House is utterly sanguine: Such a high deficit, the president argued this week, will allow them to cut it in half by 2009, when the same Bush tax cuts will still account for $183 billion of the total.

You don't understand such Peter Pan reasoning? Neither do I: but far more important, neither do the experts, many of them nonpartisan.

Stephen Cecchetti, professor of international economics and finance at Brandeis University, summed up the larger history of these developments presciently in the Financial Times this week: "By lowering government spending, and especially by eliminating deficits, Bill Clinton's administration created an environment in which interest rates fell," he wrote. "Low real interest rates spur investment and increase long-term growth. ...In 2001, things changed. A combination of tax cuts and a sluggish economy led to a swift deterioration in the U.S. fiscal position....As a result, U.S.  

So the country borrows to make up the difference between income and consumption. And the American government has been borrowing big. In fact, Cecchetti goes on: "The increase in government debt since the Bush tax cut almost exactly matches estimates of the increase in net financial claims on the U.S. held by foreigners....It is hard to believe that world financial markets are going to continue to supplying the funds needed at the generous rates we have seen up to now."

As a nation, we are courting a dangerous dependency upon foreign lenders, all at a time when our leaders are constantly beating their chests as "masters of the universe." And, remember, these are Republican "big spenders," not the Democrats, who historically deserve the title.

But also remember that the leading people in this administration are in no way traditional conservatives, with all that once meant in terms of small government, fiscal common sense and a sense of limits. These are extravagant and geopolitically radical people, both in their dreams and in their limits; they can continue with these unrealistic plans only because they so lack real experience in the world.

The problem is, they're playing with our future.

2004, Universal Press Syndicate

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