2013 America is wondering what we’re up to

One of my favorite Jerry Seinfeld bits is about the eternal struggle between Night Guy and Morning Guy. Night Guy, for example, likes to stay out late and drink too much. There’s an important early meeting tomorrow morning at work? That’s Morning Guy’s problem!

Morning Guy, naturally, hates Night Guy. Morning Guy has to deal with the consequences of Night Guy’s reckless irresponsibility. Morning Guy feels the hangover and suffers after a couple of hours sleep.

What’s Morning Guy to do? He’s got limited options. As Seinfeld explained in the intro to an episode of his television show in 1992, “The only thing Morning Guy can do is try and oversleep often enough so that Day Guy looses his job and Night Guy has no money to go out anymore.”

Seinfeld’s Morning Guy vs. Night Guy reminds me a lot of George W. Bush’s 2003 America vs. 2013 America. It’s safe to say if Bush has his way, 2013 America is going to hate 2003 America at least as much as Morning Guy hates Night Guy.

In 2003, Bush has already made some economic gambles that haven’t worked out. After guaranteeing he could cut taxes (by $1.4 trillion), grow the economy, and reduce the national debt, reality has sunken in. Bush, as an objective factual matter, was wrong. He told America we could afford it all, and we couldn’t.

As Jeff Madrick explained in Sunday’s New York Times, “[T]he Bush tax cuts have made long-term financial prospects significantly worse. Occasionally, tax cuts make sense. But the $1.4 trillion tax-cut package passed in 2001 would have been more productive if it had been temporary and applicable to more taxpayers. Instead, it was skewed to the rich (who are prone to save rather than spend) and will be permanent — far from disappearing should the economy improve, the tax cut will grow larger.”

Nevertheless, for many Americans — and most of Congress — the president’s credibility on budgetary issues has not suffered as a consequence of his previous mistakes. With that in mind, Bush continues to fight for more tax cuts, which like the 2001 cuts, primarily benefit the wealthiest Americans.

At this point, Congress continues to squabble about how much of Bush’s new round of tax cuts they should approve, with the House supporting three-quarters of a trillion dollars and the Senate approving a cut of one-third of a trillion dollars. Both seem to agree that some cuts will improve the economy in time for the 2004 elections, despite the fact that most economists appear to disagree, and both are agreeing to leave the original $1.4 trillion in cuts in place.

While the House and Senate wrangle, what’s weighing heavily on my mind is 2013 America. After all, failing to plan is planning to fail.

If you believe that deficits should be avoided or kept to a minimum, you probably find it hard to believe how poorly things have transpired in a very short period of time. When Bush took office, the deficit was gone, presumably forever. The U.S. had enjoyed four consecutive years of surpluses for the first time in history, including a $240 billion surplus — the largest in history — in 2000.

Since then, things have taken a turn for the worse. Last year, under Bush’s budget, the U.S. went back into deficit spending. At the time, Bush promised “our budget will run a deficit that will be small and short-term.”

That, too, turned out to be false. For 2003, the national deficit will almost certainly grow to the largest single-year shortfall in history. As Daniel Gross explained in a recent Slate column, if the Congressional Budget Office’s projections are accurate and there isn’t a sudden burst of economic growth this year, “the government will take in revenues of $1.7 trillion and spend $2.16 trillion — a $460 billion deficit.” Please remember, this figure does not include the costs of the war in Iraq, nor the spending needed for post-war rebuilding. In other words, a deficit well over $500 billion is not out of the question for this year.

This year will be bad and the future doesn’t look much brighter. During the presidential race of 2000, the non-partisan Congressional Budget Office estimated that the 10-year forecast for the surplus was $5.6 trillion. Bush counted on this estimate and used it to justify his 2001 tax cuts.

Where are we now? With the massive tax cuts passed without reduced spending, compounded by anemic economic growth, the CBO now believes the U.S. will have $1.8 trillion in deficits between 2004 and 2013. As Madrick explained in the Times, some believe it will be even worse. “William Gale and Peter Orszag of the Brookings Institution figure the deficit is likely to approach $2.5 trillion. The Wall Street economists William Dudley and Edward McKelvey of Goldman Sachs say that the deficit will exceed $4 trillion by 2013.”

Madrick’s next point is the scary one. “The timing of this looming deficit could not be worse. The retirement of baby boomers is about to begin en masse. In 10 years, the costs of Social Security and Medicare will start rising rapidly. By the 2020’s, these costs will begin to reach roughly 12 to 15 percent of gross domestic product, compared with about 6.8 percent today.”

In other words, we’re making decisions now that have the potential to devastate 2013 America.

“The concern about large deficits is that they reduce long-term economic growth and produce even less revenue for social programs,” Madrick explained. “When large enough, government deficits require so much federal borrowing that they can displace private investment and push up interest rates on mortgages, consumer credit and business borrowing to levels that thwart home buying, consumer purchases and capital investment. (If interest rates should stop falling, home refinancing, which has recently been a principal source of more money for consumers, will be less attractive.)…. The slower growth that results from large deficits affects everybody. It leads to lost jobs, lower wages and fewer business opportunities.”

Congress isn’t completely oblivious to this point. In fact, the House has decided in its budget that it will inject some “responsible” behavior into the looming crisis. How? By cutting spending on social programs that benefit millions of lower-income Americans.

As columnist Bob Herbert noted in an essay last week, the House’s budget, while endorsing every penny of Bush’s requested tax cuts, would cut Medicaid to the extent that health coverage could be eliminated for 13.6 million children, cut funding for foster care and adoption program leading to 65,000 abused and neglected children losing benefits, and cut the food stamp program, lowering the average benefit to 84 cents a meal.

Even with these spending cuts, the House budget still shows deficits far into the future because it couples the spending cuts with massive tax cuts for families at the other end of the economic spectrum.

Madrick’s article leaves a glimmer of hope. “There is time for a course correction,” he wrote. “But the longer the nation waits, the harder the problems will be to fix.”

2013 America is not around to complain right now, just as Morning Guy isn’t around Night Guy to beg him to go home and go to bed. One can only hope 2003 America comes to its senses before 2013 America wakes up and discovers what we’ve done.