“I’m so bored. I hate my life.” - Britney Spears

Das Langweilige ist interessant geworden, weil das Interessante angefangen hat langweilig zu werden. – Thomas Mann

"Never for money/always for love" - The Talking Heads

Monday, February 03, 2003

Deficits and us

LI is not a deficit hawk. We felt that the budget surplus under Clinton was a mark of shame, rather than a badge of honor -- it represents the lost opportunity of finally implementing a true national health care system, which in the end would be a much more valuable asset to this country than paying down on the national debt. Our idea is that the question of the deficit has to start with the premise that all deficits are not equal. One has to judge a deficit on the basis of where the money has gone, and where it will go. The supply siders have formed a meretricious cult around a fundamental truth: a budget is part of an ongoing process. It is embedded in a history. Deficits now may make way for surpluses later. Why? Because the money borrowed was spent wisely. What is wise spending? Spending that benefits the general welfare in health, education, science, infrastructure, etc. What is unwise spending? Spending that leads to death, or increases inequality, or is so excessive in one department that other necessary departments are squeezed to accomodate it. The idea that deficits should be judged wholly on whether they squeeze credit for private enterprise is probably deficient both on the evidence and on its motivated neglect of what state spending does. It is accounting that only concentrates on expenditure. It is, in other words, religion rather than rationality.

Judging, then, by our criteria, we find the Bush maladministration of the budget one of the most shocking large facts of the age. And the bodyguard of lies that have surrounded the looting of the Treasury are so blatant, and so unexamined, that we have to go all the way back to... well, the days of the New Economy, when Enron was Fortune's most innovative company in the U.S.A.

So, a little history.
Last year, in July, the Bush administration floated the news story that the surplus of 2001 was being reversed, slightly.

"The Bush administration expects the federal government to post a deficit of $165 billion this fiscal year, a 56 percent increase over earlier projections due in part to a surprise downturn in tax revenue caused by the stock market sell-off, officials said."

Now, when earlier projections are that much off, what you want is a new model. Did the 165 billion dollar deficit, in fact, eventuate? According to the Center for Budget and Policy Priorities, the budget deficit for 2002 was probably about 16 billion over that.

Excluding the surpluses in Social Security, the budget is in deficit by $181 billion in the current fiscal year, 2002; such deficits are projected to continue for the following seven years, with surpluses not reappearing outside Social Security until 2010. The cumulative non-Social Security deficit over the period 2002-2011 is projected to total $700 billion. This outlook is a remarkable change from the projection CBO made only one year ago, when it projected surpluses outside of Social Security totaling $3.1 trillion over the ten-year period 2002-2011.

Just two weeks ago, the Bush backgrounders were telling the press to expect a budget deficit of around 200 billion for 2003. Now the budget has been officially presented. Guess what? Just as, last year, the real budget deficit was grossly larger than the one projected by the government, so, too, the new projection is about 50% bigger than it was just two weeks ago. My my, how an AOL-like sum of money can just pass through your fingers!

"WASHINGTON -- Due in large part to his proposed $670 billion tax-cut plan, President Bush's fiscal year 2004 budget will post a record deficit of $307 billion on spending of $2.23 trillion, according to budget documents distributed Monday. In addition, the budget makes no provision for the cost of fighting a war against Iraq. However, in his budget message, Mr. Bush argued the deficit wasn't all that large. "Compared to the overall federal budget and the $10.5 trillion national economy, our budget gap is small by historical standards," Mr. Bush said in his budget message."

Not putting in the cost of the war in Iraq was a bit of imbecile brilliance that is sure not to attract attack from the belligerent press. Don't look for the Washington Post or the Wall Street Journal to editiorialize about the fiction of ignoring a figure that is potentially half the size of the budget deficit. Alas, we suspect that the Dems will simply take the Hoover route and attack the deficit itself. That you run a deficit in a recession is ... well, what you do. That you spend money in such a way that you eventually make it back, in increased tax revenue, to pay for State services, is the key, here. The Great Giveaway will simply dissipate wealth among the most profligant, shift equity investment to companies that will have to borrow to increase capital expenditure, and operate as a salve to the massively bad investments of the dishonest upper ten percentile. This is Moral Hazard writ large.

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