The Cranky Advocate's
Guide to the Bush Budget and Tax Nightmare
The Budget: Deficits as Far as
the Eye Can See
According to an analysis by the highly-respected and
nonpartisan Center for Budget and Policy priorities, budget deficits
will remain at or above $325 billion for each of the next ten years
and total $4.1 trillion over that period. Similar estimates have been
given by Wall Street firm Goldman Sachs.
The Bush Administration says that these deficits are
"manageable", but it also goes out of its way to make these
deficits appear smaller than they are likely to be after 2004 by using
rosy estimates, omitting certain costs and --very conveniently -- ending
the budget projections in 2008 just as the first of the Baby Boomers
start to retire.
How big is that and so what anyway?
Budget deficits will force painful cuts in important
social programs. The estimated 2013 deficit will be $530 billion--six
times the budget of the Education Department or the Veterans Department,
13 times the annual budget of the Department of Homeland Security and
41 times the budget of the Environmental Protection Agency.
Further, growing interest payments on the national debt
will drain funds that could have been used for funding gaps that will
occur in the future in Medicare and Social Security.
What's causing the deficit?
The President also says the deficit is caused by the
war and the recession. But, in fact, the tax cuts are a much more significant
cause. In 2003 and 2004, for example, the cost of the tax cuts is almost
three times more than the cost of "war"--even as defined as
including homeland security, Afghanistan and terrorism-related costs.
The president's own budget staff [OMB] did a recent
review that shows that low tax revenues, not spending, is the main factor
behind the jump in the deficit. Income tax receipts, as a share of the
economy, could drop to their lowest level since 1943.
Can't the states provide programs cut by Bush and the
Congress?
No. States have $80 billion in budget shortfalls for
fiscal year 2003 and $79 billion for FY 2004. Because balanced budget
laws require them to close deficits, states have been cutting important
programs including education, health care and public safety.
States did not spend their ways into this crisis. State
spending actually grew more slowly during the 1990s than in previous
decades. Most of the growth that did occur was in education, health
care, and corrections--areas where costs were rising, need was growing
and/or voters were demanding it.
The major cause of the current state fiscal crisis is
a steep drop in revenues because of the economic downturn and the erosion
of state tax bases as services--which are generally not taxed--become
a bigger part of economic activity. States have also lost tax revenue
because of the ripple effect of the federal tax cuts.
The Tax Cut: More Money for the Well-Chosen Few
The "official" cost of the tax cuts enacted
in May, 2003 is $350 billion through 2013. But this does not take into
account the various gimmicks used to conceal the true cost of these
tax cuts which is likely to be $800 billion to $1 trillion.
Ok, but what's wrong with a middle class tax cut?
Well, there really wasn't one. The middle class wasn't
the focus of these cuts.
The White House used the misleading technique of "averages"
to try to get the public to buy in to the plan. The Treasury Department
release said that "91 million taxpayers will receive, on average,
a tax cut of $1126". But households in the middle of the income
spectrum will only receive an average cut of $217; 53% of households--74
million-- will get a cut of $100 or less and 36% will get no tax cut.
Like the first Bush tax bill in 2001, the May 2003 tax
legislation is heavily skewed toward the upper end of the income scale.
Persons making over $1 million will get a tax cut of $100,000.
Enough already... But it can't get worse, right?
It can and likely will.
First, the House has already voted to make the estate
tax repeal permanent. This would add roughly $80 billion a year to the
deficit at the time the Baby Boom retirement really gets in gear [2014-2023].
And don't believe the hype, repeal of the estate tax
benefits only .5% [that's one half of one percent] of estates--very
few of which are family businesses or farms. Estimates have also shown
that repeal of the estate tax will cause significant reductions in charitable
giving.
Second, there is every reason to believe that further
tax cuts will be sought. Grover Norquist, an anti-tax advocate who works
closely with Bush aides, predicts: “You’ll have a tax cut
each year. I state it that way in all of the (White House) meetings,
and I never get an argument.”
|
