June 09, 2005
The Incredible Shrinking Deficit
On the subject of government revenues, it looks like this year's deficit won't be as bad as projected, clocking in at $350 billion rather than $427 billion. Good stuff, and the administration will surely tout it as a God-given sign that their agenda is a blessed one, and their fiscal policy wise. But let's not relax yet:
the nation still faces long-term deficit problems. Overall federal spending is increasing, including for war costs. More broadly, spiraling health-care costs for Medicare and Medicaid programs, including a prescription-drug benefit for seniors starting next year and a wave of baby-boomer retirements after 2008, will drive federal deficits to unsustainable sizes.
"These are the good ol' days. These are the best of times," says Congressional Budget Office Director Douglas Holtz-Eakin, a former administration economic adviser. "After this, it gets worse."
The WSJ has a graphical representation of this that's pretty stark:
So, sorry kids, smaller deficit or not, we're still going to have to raise those revenues. And, on an ironic note, much of the narrowed deficit comes from the administration counting Social Security surpluses up until 2017. So you can argue whether or not that program's in bad shape till you turn blue in the face, but what does it say about our fiscal picture that the program remains a rare bright spot our economy?
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Is it really shrinking, or are they fudging the numbers again? In previous years, the WHBO early estimates have been artificially high, allowing them to more easily claim success at fighting the deficits. The Bush2.2 claim that he would cut the deficit by 1/2 was based not on an actual number from the previous year - but on their (intentionally) flawed estimates.
Posted by: Brew | Jun 9, 2005 2:22:18 PM
Good grief. By incorporating the projected spending explosion - which includes future Soc. Sec. benefits as well as projected spending on Bush's massive Rx benefit - the WSJ masks the decline in the tax/GDP ratio. Creative graphing, I guess.
Posted by: pgl | Jun 9, 2005 2:30:41 PM
I didn't see anything there that addressed non-budget defense expenditures. Like, for example, running the war on Iraq.
Posted by: TJ | Jun 9, 2005 3:12:20 PM
So I guess by that I mean that the "budget" doesn't really reflect reality, and taking to heart these numbers isn't really a useful act.
Posted by: TJ | Jun 9, 2005 3:15:10 PM
Thank goodness for TJ in the comments section. When I saw that graph, I damned near freaked out.
Maybe global warming will solve all this for us.
is your email working yet?
Posted by: Neil Paul | Jun 9, 2005 3:29:06 PM
I smell a new campaign slogan:
"Now 18% less incompetent than previously imagined, if you take into account the accounting tricks, off-budget expenditures, unsustainability of the tax policy, and long-term ruination that will surely result from the course we've set!"
Posted by: norbizness | Jun 9, 2005 3:29:36 PM
at least you Texans have state government to fall back on.
Posted by: Neil Paul | Jun 9, 2005 3:47:49 PM
We should all be screaming LOCKBOX! by now.
Posted by: Adrock | Jun 9, 2005 3:55:10 PM
That graph is hilarious - all the current figures track fairly closely together, and then, remarkably.... in the forecast years everything goes Ape-shit! :) That curve in expenditures is indeed quite frightening, but it also seems terrifically unrealistic. If that's really where we're headed, we may as well just prepare for anarchy now, cause a tax increase won't fix it.
Posted by: weboy | Jun 10, 2005 8:36:26 AM
Posted by: peter.w | Sep 16, 2007 10:22:11 PM
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