Budgetary scare tactics?
Be afraid; be very afraid
By David Broder: Oct. 5, 2003
WASHINGTON - Maybe all the others are wrong. Maybe those in the Bush
administration who claim we can grow our way out of these big budget deficits
if we just keep cutting taxes to stimulate the economy know something no one
else grasps. But if I had to bet my grandchildren's future prosperity on
anyone, I would not bet that way,
I would not be that foolhardy, not when the list of people warning that this nation has embarked on a dangerous and unsustainable fiscal course that will wreck our economy and threaten our international standing includes those who now are frantically signaling us to straighten out our policies before it is too late.
Some members of Congress of both parties have argued for months, if not years, that the lack of spending restraint, coupled with the penchant for ever larger tax cuts, cannot be allowed to go on. Their cautions have gone unheeded.
Now they are finding credible allies. David Walker, the comptroller general of the United States, is an appointed official with a 15-year term that gives him complete political security. His staff in the General Accounting Office provides the fullest range of information on government finances. Last month, Walker went to the National Press Club to raise a public alarm where he hoped it would be heard. "Our projected budget deficits," he said, "are not manageable without significant changes in status quo programs, policies, processes and operations."
Last week, three organizations that had not previously collaborated joined at the Press Club to spell out in specific terms what Walker meant. The Committee for Economic Development, a group of business and education leaders; the Center on Budget and Policy Priorities, a liberal leaning research and advocacy group; and the Concord Coalition, a bipartisan organization focused on sound fiscal policy, issued their first joint statement on fiscal policy. They called the current budgetary situation "the most fiscally irresponsible" in American history.
Staff members of the three groups said that a realistic picture of the next decade shows it is likely that annual deficits will rise from current levels of $400 billion to more than $600 billion and total $5 trillion between 2004 and 2013 even assuming a quick return to healthy economic growth and lower unemployment.
Those numbers are incomprehensible. But a better sense of their meaning comes when the groups say that if current policies remain, balancing the budget by 2013 would require raising individual and corporate income taxes by 27 percent, cutting Social Security by 60 percent, cutting defense by 73 percent, or cutting all programs except defense, homeland security, Social Security and Medicare by 40 percent.
That sounds like scare talk. But the reality is that after 2013, things will get worse. The first of the baby boomers reach retirement age in 2008 and from that point on, Social Security and Medicare payments will explode as the number of claimants rises each year. As Pete Peterson, the Republican former secretary of commerce, told the news conference where this report was presented, anyone who thinks those programs are solidly financed ought to think again.
“To talk about a Social Security trust fund is a fiscal oxymoron,” he said. “It isn't funded and it can't be trusted.” Rather, the government faces $25 trillion of unfunded entitlement obligations.
Is this just scare talk? Peterson, a major financier, does not think so. Neither does another panelist, Robert Reischauer, the former head of the Congressional Budget Office. And neither does Robert Rubin, the former Clinton administration treasury secretary who helped design the policies that briefly put the federal budget into surplus and contributed to the economic boom of the late 1990s.
Rubin said, "There is no question that these (budgetary) conditions pose a very serious threat to our economy."
The massive borrowing that the government will have to do to finance these deficits will shrink the supply of capital available to the private sector when it needs to expand, and force up interest rates "to substantially higher levels. It is a virtual certainty there will be a day of reckoning."
Are all of them wrong? I would love to think so. But I hate to bet my grandchildren's future on it as we are doing now.