What’s the hurry? Why not wait awhile and see how the economy plays out? Treating long-term projections like they’re facts is folly. For heaven’s sake, even the Great Greenspan screwed up a short-term forecast last fall by not seeing that the economy was softening. That mistake is why he’s cutting interest rates so sharply, an economic cardiologist trying to keep his patient from croaking. So answer me this: if the plugged-in experienced Greenspan couldn’t foresee the economy four months ahead, how can anyone think the Congressional Budget Office (or anyone) can foresee the economy 10 years ahead? Especially when the CBO, whose surplus projections are the heart of Bush’s tax-cut case, regularly devotes an entire chapter in its reports to “The Uncertainty of Budget Projections.”
History makes my case for me. Until a few years ago experts predicted huge deficits as far as the eye could see. Now they predict huge surpluses. A year ago the CBO projected a $3.1 trillion 10-year surplus. Six months ago, $4.6 trillion. Last month, $5.6 trillion. Why should we treat today’s number as right when yesterday’s was so wrong?
Consider how the surplus grew $1 trillion since July. The biggest factor: the CBO raised its economic growth estimate to an average of 3 percent a year above inflation from the previous 2.7 percent or so. That added $1 trillion to the surplus. An additional $600 billion came from dropping fiscal 2001, the current year, from the forecast and adding 2011. (The 2011 number, being the farthest out, is the least reliable.) That totals $1.6 trillion of added surpluses. Why is the increase only $1 trillion? Last year’s congressional spending spree, an abandonment of already-weakened fiscal discipline, knocked $600 billion of surpluses off the 10-year numbers.
That spree illustrates how, if you leave money in Washington, it’s likely to get spent. And why tax cuts, which can at least in theory be reversed, are financially sounder than new spending programs, which you can’t eliminate with anything short of a tactical nuke. (That’s why Greenspan, hedging like the master he is, backed a tax cut if surpluses stay high. He didn’t support Bush’s tax proposal.) I don’t want to see once-in-a-lifetime surpluses wasted on silly spending. But I don’t want to put my children’s future at risk with a gigantic tax cut that’s based on budget projections that are sure to be wrong.
To the Bush numbers. Start with the $5.6 trillion projected surplus. Subtract the $2.5 trillion Social Security surplus that we’re supposedly committed to setting aside. Subtract $400 billion more for the Medicare surplus, and you have $2.7 trillion. The Bushies say their cut runs $1.6 trillion. Let’s be sports and accept that number, which actually knocks $2 trillion off the projected surplus. Why? Because lower revenues mean more Treasury debt than the CBO projects, which adds about $400 billion to the government’s interest tab. So you’ve committed almost everything you’re likely to have for 10 years. And that’s without fixing the alternative minimum tax ($250 billion, minimum), or giving business a place at the tax trough, or casting a few crumbs to people who pay Social Security and Medicare tax but not income tax. Let discretionary spending rise faster than inflation ($360 billion a percentage point), toss in a few other odds and ends, and you’re back in Deficit City.
There’s a logic problem here, too. The Bushies say we need a hurry-up tax-cut offense because the economy is tanking. But if the economy does poorly for a few years, the surplus shrinks drastically. As for the “starve the beast” argument that cutting tax revenues will cut spending: the Reagan years showed that the beast doesn’t starve, it just borrows money.
I won’t even deal with the problems of Medicare and Social Security, both of which will start bleeding heavily not long after the current 10-year projection period ends. A subject for another day.
The bottom line: I’m afraid we’ll cut taxes so much that we’ll eliminate the whole non-Social-Security surplus, if not more. So when the inevitable economic stumble happens, the budget will get ugly in a hurry. When that happens, don’t say you had no way to know. There were all sorts of warnings. You just weren’t listening.
