Budget spin vs. budget reality

January 25, 2007

I saw a surprising number of headlines yesterday about the nonpartisan Congressional Budget Office’s budget estimates, and how the federal government really is on track towards balance by 2012. It’s probably worth taking a moment to remember that it’s completely untrue.

The federal budget deficit will fall to $172 billion this year and $98 billion next year, then disappear completely by 2012, according to a report released yesterday by the Congressional Budget Office. But virtually nobody — not even top CBO officials — believes it.

That is because the CBO, the nonpartisan office that supplies Congress with cost estimates, is required to make some whopping assumptions, including: that all of President Bush’s tax cuts will expire on schedule in 2010; that the alternative minimum tax will be permitted to ensnare millions of additional taxpayers; and that the war in Iraq and other military operations will never cost much more than the $70 billion that has so far been approved for the fiscal year that ends in September.

Back in the real world, even Democrats want to extend at least some of the Bush tax cuts. Even the White House wants to halt the expansion of the alternative minimum tax. And, as for global war efforts, the president is calling for an additional 21,500 troops to be sent to Iraq and is expected to ask Congress to approve an additional $100 billion for this year alone.

In other words, all of the “good” news we heard yesterday is a bit of a sham.

Moreover, as the Center on Budget and Policy Priorities explained this week, the CBO also considered “alternative scenarios” for the next several years, including a more realistic set of expectations regarding tax cuts and the war. With these numbers, existing budget policies are expected to add as much as $3.4 trillion to the national debt.

The president said in his State of the Union that he can keep all of his tax cuts and balance the budget “within the next five years.” Frankly, I’d love to see him try. Even the CBO acknowledges that Bush can move towards balancing the budget or he can fight to keep his tax cuts — but he can’t do both.

Just as an aside, this reminds me of a silly idea I had recently. I hesitate to put it in print, and open myself to all manner of ridicule, but I actually wouldn’t mind some feedback.

I’ve been considering how the Dems’ presidential contenders are going to deal with the budget mess Bush has created. No one wants to run on a platform of raising taxes, but no one wants to run on a platform of “Vote for me and I’ll figure it out later,” either. Reporters and voters are going to want to know whether the candidates plan to keep Bush’s tax cuts or not. If they say they will keep them, they’ll be expected to explain how and why that’s responsible. If they say they won’t keep them, they’ll be accused of running a Mondale-like campaign.

So, here’s my idea: the ’08 Dems can say, “I’ve disagreed with President Bush and congressional Republicans on a great number of things, but in 2001, they did something very smart. After deciding on a massive tax-cut package, they very wisely put a sunset clause in, so the tax cuts would eventually expire, and tax rates could return to a responsible level, similar to where rates where in 1990s when the economy was stronger.

“I was skeptical, but Bush and the GOP showed real forethought when they did this, and they are to be congratulated for their wisdom. In fact, I’ve decided to embrace their plan enthusiastically — the tax cuts will expire, just as Bush and the Republicans planned. We can then help bring the budget towards balance, without sacrificing key national priorities.”

Republicans will howl, but the Dems can say, “Why can’t you take ‘yes’ for an answer? You guys scheduled these cuts to expire, and so that’s what is going to happen. This was your idea — so there’s no point in you complaining about it now.”

Too much?

January 25, 2007 at 10:37 am

one thing that has always bothered me is the failure to differentiate between the annual budget deficit and the cumulative national debt. even if we were able to balance the annual budget by say 2012, that STILL DOES NOTHING TO BRING DOWN THE NATIONAL DEBT! so for those who are out there that feels the mission has been accomplished if only we could balance one year, think again. generations that follow will have a lot of financial cleaning up to do. it scares me that congress is so careless with our money.

A big plus with your proposal, CB, is that if spun right, the media will treat it as a “middle-of-the-road” position – ie, sensible, bipartisan, responsible, etc. “I support the tax cuts, but I also support maintaining the expiration date” can become the middle-of-the-road standard against the others are judged. Repubs of course can’t support anything except extending the tax cuts, so they sound partisan and out of the mainstream. So it’s a good call.

Great idea. You know there will be political ads in 2012 that go “Democrat Senator X just allowed a tax increase by not voting for the Republican plan to make the tax cuts permanent”. In other words, they will shove the problem onto the Democrats, who hopefully will be a significant majority at this time. By giving Republicans ownership of this NOW, this not only gives them the rightful ownership of this, but it also raises the issue of the smoke and mirror economy the previous congress dumped onto our country.

The problem with your idea is that it’s fundamentally dishonest. We all know the reason the Republicans put in the sunset was to make the package look less expensive than it otherwise would have been. Almost as soon as it was passed, Bush and company began pushing to make the tax cuts permanent.
Your proposal is a bit too cute.
An alternative would be to be more honest and admit that we can’t afford it. But we should retain the tax rates on the lower brackets, and only restore the rates on the upper two brackets.
And it’s important to use that language: “restore the rates” (as opposed to raise taxes) to where they were during our most prosperous decade since WWII.

I’m sure the wingut pundits will leave this little statement out of their exclamations on how Bush’s tax cuts are working miracles:
“The CBO report does not support claims that the tax cuts are paying for themselves, producing record revenues, and promoting exceptional economic growth. As recent Center analyses demonstrate, such claims are unfounded. Economic growth in this recovery remains below average for post-World War II recoveries. “

The problem with your idea is that it’s fundamentally dishonest.

I couldn’t agree more. The GOP tax cuts were dishonest, the sales pitch was dishonest, their smear of Dems was dishonest, and their promises in 2008 will no doubt be equally dishonest.

My idea, which is admittedly too cute by half, is to hopefully turn their dishonesty around on them. That said, your point is well taken.

As a political strategy, CB, I like your idea. But John and “just bill” make points I would like to see the Dems make as well: the tax cuts are not stimulating the economy enough to pay for themselves and even with a balanced budget, we will be paying billions servicing the debt. Those are billions that could be spent developing green technologies, health-care, and education.

Nice idea, but I would rather see someone go right at them, and use the extreme skepticism towards the Republicrooks to show what a sham their “budget” was/is. Remind everyone how the Republicans told us that the Iraq war was going to “pay for itself”. Expose how we have all been ripped off, using simple examples that everyone is familiar with and no one can dispute. This should take about two minutes.

Once Republican “fiscal responsibility” is shown to be the fraud that it is, roll right over them with a sensible budget that actually pays the bills, instead of putting the cost of everything onto our kid’s VISA card. Get out the Ross Perot pie charts, keep it SIMPLE, and pound the fiscal morality argument. It is immoral to steal, especially from the poor, and that’s exactly what they’ve been doing. If Republicrooks want to obstruct a moral budget, fine. 2008 will be a BITCH.

Obviously some Democrats need to be taken to the woodshed as well, but I think people are SICK of seeing their kids saddled with the cost of giving rich people more tax cuts, an oversized military, and of course the monstrous costs of our private “health care system”.

All we need to do is keep reminding people how many Republicans are in jail for bribery and fraud, and keep our own ranks clean. The people will see who’s the better steward of their money, and who can’t be believed in the budgetary debates.

I like the ides CB. I suggest you add a reference to 9/11 to help counter the dishonest argument some have mentioned. Right after 9/11 the government needed to lower taxes to maintain the economy (not to make huge gains). Now that we have economically recovered from 9/11 the tax cuts should expire blah blah….

I agree with Racerx, the real issue is the complete immorality of constantly increasing the agregate debt the nation must pay. The debt is now so large that we’ve yet to pay down just the interest on the debt run up during the Reagan administration.

“Fiscal responsibility” means raising money through taxation on the individuals and corporations that are here now, not passing on our bills to taxpayers that have yet to enter the workforce or have yet to be born. In my view, not enough is being said about this. The reason is obvious – politicians are craven, spineless louts that care more about reelection than taking care of the people’s business effectively. How can the Democrats argue fiscal responsibility when they have willingly raised the debt ceiling time and time again??

A pox on all their houses!

Isn’t it better to say somthing along the lines of:

“I opposed the tax cuts, because I didn’t believe that they would pay for themselves as claimed. However, if there is anything they did right, it was providing a sunset clause so that this was a trial period to see if their ideas really work. Since they don’t (as the CBO report makes clear), it is time to let that idea die, along with their profoundly unwise tax cuts.”

That seems way too wordy, but the idea is “They were wrong, but at least they were wrong in a way that makes it easy to correct their mistake. Now we will take advantage of that opportunity.”

To riff off of CB’s idea, I’d prefer to hear that the Bush years were a gigantic “tax holiday” for an elite class of Americans whose tax load was shifted onto the struggling middle class. The sunset clause is putting a timely end to that holiday and the elites should shoulder their fair share of the tax burden once again.

When this nations solves a few problems like terrorism, immigration, healthcare, global warming, alternate energy sources and massive trade deficits, we can go back on a tax holiday again.

Why not just focus on a) letting the 2001 tax cuts expire, and b) dealing with the Alternative Minimum Tax problem. Then the Dem candidate can say, “I’m letting the GOP complete its course, but I’m also ensuring that we have true tax relief for millions of Americans.”

seems reasonable to me. reform of the AMT counters the “dems raise taxes charge” while letting the tax cuts expire keeps the fiscal situation almost sane.

The problem with your idea is that it’s fundamentally dishonest.

I don’t think it is fundamentally dishonest at all. You say, “We all know the reason the Republicans put in the sunset was to make the package look less expensive than it otherwise would have been.” Do we? Is that what they said publicly? No? Then all we have is hearsay and conjecture. Let them try and fight their own stated reason. Force them to act on their word.

I wouldn’t mind going straight at them for fiscal irresponsibility, either. I like using their own tax plan against them because I have hopes of reducing the “political doublespeak” and “conventional wisdom” expressed by John in my quote above. Yes, people “in the know” know what is going on, and so often they either decide not to tell the rest of the people, who may not be as “politically savvy”, or they let it slide as business as usual.

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