By Paul Petillo
When it comes to President Bush¹s latest budget proposal, we could begin with the following quote: "there are no limits on the capacity for intelligence, imagination, and wonder". That little snippet was spoken by President Ronald Reagan in1983 delivered at the University of North Carolina and taken somewhat out of context. It refers to his firm belief in supply-side economics. This is the same president who embraced Canadian economist Robert Mundell's theories of cutting taxes to promote growth, turning a blind eye not only to the size of the subsequent deficits but to their duration and, of course, reversing the tight fiscal and loose monetary policies of his predecessors.
He won many ardent fans with his actions. While there was no room in the Reagan White House for alternate thinking, his policies set his successor up for failure forcing him to bear the brunt of tax increases, for what became known as austerity economics and lastly, for a recession.
Politicians, better than anyone know the penalties for imposing tighter restrictions on growth. History tells us that any increase in the misery index via austerity is not only social but also political and economic suicide.
We could then fast-forwarding to the post Bush Sr. nineties, when pay-as-you-go laws were passed designed to control those ballooning deficits, the unfortunate fallout of supply-side economics. As a result of those changes, the country experienced a growth spurt in not only personal savings but on a federal level as well. In fact, by 1999 the Congressional Budget Office predicted surpluses as far as the eye could see by the end of the next decade. With a GDP growing at an inflation adjusted 3.9%, the immediate future was promised a windfall of $2.8 trillion dollars.
Seven years later, after ballooning deficits and misguided tax cuts, the president is suggesting in his new budget a return to austerity, but only for a select group, a sort of hybridized economics with a dash of Mundell and a pinch of Charles Murray, the extreme right wing academic who believes, among other things, poor people are poor because of inferior genetics.
The presidential budget published this week requires that you use the full capacity of your intelligence, the widest scope of your imagination, and the ability to wonder whether this budget's Mundell/Murray economics will work.
As an intelligent citizen, you want the government to be clear and concise especially when it comes to accounting for those loathsome tax dollars it still collects. Thomas Jefferson did when he suggested the business of government should be easily comprehendible by "every man of any mind". This budget fails on this account.
It has been common practice to raid Social Security windfalls and this White House is no different. In 2006, they managed to commandeer almost $185 billion as a result of increased payroll receipts versus payouts. This can give the impression that when this money is applied to the deficit some sort of reduction has taken place. It hasn't. Because this practice has been allowed since 1968, when President Lyndon B. Johnson created the first "unified budget" the program has fallen consistently behind future payout projections.
The budget fails to account for its own pension obligations as well which are estimated to be north of $200 billion. It avoids, without so much as a nod, the obligations that Social Security, Medicaid, and Medicare face in the coming years. Those forty years of unified budgets have created unredeemable IOUs worth over $39 trillion to the aforementioned programs. Had Social Security been left alone to grow its funding the way private enterprise does, this entitlement program would not even be part of the discussion.
You will need your imagination to work at full capacity to grasp the proposed tax cuts to the top 1% of the wage earners. The kind of thinking that offers $73 billion in rate reductions while reducing discretionary spending by only $34 billion requires more than budgetary magic.
How much imagination does it take to understand that a $2.9 trillion budget could be whittled down relatively quickly if you gave up on the desire to make the $2 trillion worth of tax cuts permanent?
The proposal to close the tax gap is included as well. The IRS estimates that 11% of us fall into this gap worth, according to the estimates to be worth $290 billion. While not likely to gain any solid footing because of the cumbersome nature of the tax code, it would lower the remaining budget by a third if it could be captured.
Yet the call for action on the Alternative Minimum Tax or AMT, expected to affect 25 million taxpayers was addressed only half-heartedly at best. Mr. Bush realizes the windfall of tax revenues from just such a misguided tax but is willing to allow Congress to create an inflation index on its own. And the cost to just such a fix, if you can imagine, is also not included.
It also takes a good deal of imagination (and an enormous leap of faith) to consider the Iraq (and Afghanistan) conflict to no longer be a draw on the taxpayer¹s dollars whether or not we occupy the country. According to the president, beyond 2009, there will no longer be a cost. Once again, imagine that.
And finally, you have to wonder about the proposed cuts on the top of every conservative's checklist: entitlement programs. The budget assumes that by cutting almost $80 billion to the states for help provided by Medicare and Medicaid and an additional $99 billion devoted to state supplied preventative care, it will force the discussion about the growing costs of those programs. Without any real plan to improve these programs short of a limited means test for high-income individuals, austerity is always a good way to get folks talking.
Targeting veteran¹s health care seems counter-intuitive for a wartime president even if slashing over $110 billion from such important programs as Head Start, scientific research, environmental protection to mention just a few does not. But you really have to wonder about the groceries.
The Bush budget seeks to save money by cutting the delivery of groceries to over 440,000 needy elderly people. This program costs $20 per month per person or slightly over $100 million.
All budgets, whether they be your own household draft or the mess the president submitted, really need at its core intelligence, imagination and wonder. The proposed offering from Mr. Bush, with few exceptions (increases to Pell grants and a promise to fund worldwide AIDS treatment) lacks all three.
