Tuesday, March 9, 2004
The Congressional Budget Office had some good news earlier this week -- the projected deficit for the fiscal year ending this September won't be quite as bad as the White House has projected. But after that, the news was all down hill.
First, the good news. The CBO found that the White House forecast of a record $521 billion for the current fiscal year was unduly pessimistic. The CBO says the deficit should fall in at about $478 billion. Some cynics have suggested that the White House purposely inflated the figure at more than a half-trillion dollars, which would make the actual figure look good by comparison.
Even if the White House gets a little pre-election bump out of playing a numbers game, there is no gilding the deficit lily. The nation is on track to run up enormous, possibly unsustainable deficits.
For some time, we have warned that we are living high off the hog at the expense of our children and grandchildren. That may have made some people feel guilty, but not guilty enough to demand that anything be done about it.
Possible consequences
But baby boomers may want to stop worrying about shifting debt to the next generation and start worrying instead about whether the growing national debt and the long-range dependence on deficit spending is going to allow the federal government to meet its Social Security Trust Fund obligations when the boomers start collecting their checks.
And all citizens, regardless of age, should start worrying about the effect that massive deficits will eventually have on interest rates, on the soundness of the dollar and on the prices we will have to pay, especially for vital imports such as oil and gas.
Deficits do matter. And deficits on the level projected by the CBO will matter greatly.
The Bush administration claims that it will cut the deficit in half within five years, to $239 billion. The CBO says that the deficit in 2009 will be more like $258 billion. By one measure, the administration succeeds; by another, it doesn't. And the administration is ready with a backup story that what it really meant was cutting the deficit in half as a percentage of GDP.
10-years forecast
What's really ominous is the CBO's 10-year deficit forecast.
The Bush budget forecasts stop five years out because the White House says 10-year forecasts are too unreliable. (The White House thought they were reliable enough to justify the president's tax cuts three years ago when the CBO was predicting a $5.6 trillion surplus in 2011. Those kinds of projections were predicated on the budge surpluses that President Bush inherited from the Clinton White House.)
The CBO says that over 10 years the president's spending plans and tax cuts, if made permanent, will produce $2.75 trillion in total deficits, increasing the publicly held national debt -- that's exclusive of IOU's to Social Security -- by two-thirds.
That means the president's plan offers only token deficit reduction in the short term and none at all in the long term.
And while presidents need only to worry about the budget for four years or, at most, eight years, the common folk have to think about the impact these deficits will have on them for the rest of their lives.