And pigs will fly
BY Mortimer B. Zuckerman Editor In Chief
U.S. News & World Report, Oct. 14, 2002
Washington has cast its hard won budget discipline to the political winds, and there's no telling when we'll see its return.
You know the feeling you get when your darned checkbook just won't seem to balance. Multiply by a few zillions, and you have some idea of the way Washington is running things these days. It's not just a nightmare; it's that old familiar nightmare we thought we had shaken off years ago: A ballooning federal deficit and its evil twin, a widening trade gap, threaten the U.S. dollar, our financial markets, and our monetary policy. For the first time since 1997, our budget this year will show a deficit probably in excess of $160 billion, in sharp contrast with a $127 billion surplus last year. This dizzying swing $287 billion is the largest on record.
Why the big change? The drop in tax revenue this year, of over $130 billion, is the sharpest in 56 years, much of it due to layoffs, pay cuts, pay freezes, fewer exercised stock options, and a fall in capital gains. What's more, the reduction of tax rates for upper income households enacted last year means that when the economy does finally pick up steam, Washington won't see a commensurate pickup in tax revenue.
The projected 10-year federal budget surplus had already shrunk by nearly 95 percent, from $5.6 trillion to $336 billion. But even that number is wildly overoptimistic. It doesn't include the costs of a prescription drug program for seniors, estimated to cost at least $300 billion over the next decade. It also doesn't include appropriate costs for military and homeland defense spending. And it assumes that discretionary spending will rise at the rate of inflation, a pipe dream. If government spending continues to increase at its current rate of 8.5 percent, we will add an additional $2.9 trillion in debt over the next decade.
Spree. Think it won't happen? Just look at discretionary spending this year. It's up by almost 14 percent, the biggest government spending spree in a generation. In fact, for the first time in over 30 years, annually appropriated programs controlled by Congress and the president have grown faster than formula driven entitlement programs like Social Security and Medicare. Only a third of the entire $91 billion increase in annually appropriated funds has been spent on homeland security and national defense; the rest goes for everything from highway construction to farm subsidies.
Government spending has gotten so bad that we have had to dip into Social Security and Medicare tax revenues to finance it--a habit we had broken for four years straight. Now instead of setting aside money for the certain cost of meeting the dramatic increases in retirement and health care costs we face in the next decade, we're using it to fund current expenses.
Congress has not even passed the annual budget resolution, which traditionally sets caps for the 13 spending bills, giving pork happy lawmakers the chance to spend billions on ad hoc additions to politically popular spending programs that typically accompany an election year.
Still more reckless is the double extravaganza perpetrated by the Senate on spending controls. Gone are discretionary spending caps. Gone is the stipulation that, short of commensurate spending and taxing offsets, there had to be a 60 vote majority for spending increases or tax cuts. Even Federal Reserve Chairman Alan Greenspan has failed to persuade the Senate solons to retain these essential pieces of self-discipline. The budget rules have been on the books since 1990 and helped push down discretionary spending from 10 percent of gross domestic product back then to 6.5 percent by 1998. Given the dissolute nature of this Congress, a return to fiscal discipline is as likely as seeing pigs fly even allowing for those hefty federal subsidies for pig farmers.
Both parties are playing fast and loose with the numbers. Despite the partisan attacks on the Bush tax cuts, only a small minority of Democrats argue for delaying or rolling them back. And the Democrats aren't even pretending to scale back their own spending programs. Ditto the Republicans and their spending plans. The president himself has made only token gestures toward restraining out-of-control spending.
Neither party seems to have the political will to force the budget back into long-term balance, making the fiscal out look for the next decade really grim. Instead, what we see is a competition between Democrats and Republicans over who can appropriate the most in their fervid hope to win the handful of tight races for Senate and House seats that might give one or the other control over the Congress.
The timing for all this, of course, couldn't be worse. Our fiscal outlook is deteriorating at the very moment we must begin preparing for rising claims on Social Security and Medicare funds by an aging baby boom generation. The consensus on the need for budget discipline was built painstakingly over two decades. It is more than passing sad that it evaporated in less than a year, and sadder still that we are unlikely to see its return for a long time to come.