TCS Daily

Hey, Big Spenders

By John Merline - January 28, 2002 12:00 AM

Even before the Congressional Budget Office released its report last week showing the dramatic budget surplus meltdown, Democrats were blaming the fiscal deterioration on President Bush's tax cut. It starved the government of money, they said, making it impossible to meet the nation's needs. Indeed, some brave Democrats were already talking of postponing cuts slated to take place over the next few years.

Now that the official budget numbers are in, that rhetoric is sure to grow more heated. Just think: in one year the projected 10-year surplus dwindled to $1.6 trillion from $5.6 trillion. The surplus for this year, expected to top $313 billion in the CBO's January 2001 report, has turned into a deficit of $21 billion. Even in a $2 trillion budget, that's a remarkable swing for such a short-term forecast.

It's not surprising that Democrats have jumped on Bush's tax cut as the main cause for this decline. Doing so makes great campaign fodder against an otherwise popular president. Too bad the numbers don't back them up.

This year, for instance, the tax cut accounts for just 11% of the swing from surplus to deficit. Over the next decade, it comprises less than a third of the total drain on the surplus. The economy and simple forecasting mistakes by CBO account for far more of the decline.

Nor does the claim that Bush's tax cut has starved the Treasury of funds stand up. Even with the cuts, federal revenues will be at historic highs for the foreseeable future. According to the CBO, taxes will chew up more than 19% of the nation's GDP through 2012. That's up more than a full percentage point from the post-World War II average. Far from a starvation diet, the federal government is slated to get seconds and thirds.

Left unremarked upon by Democrats, and Republicans for that matter, is the fact that excessive spending is the real source of the surplus meltdown. For fiscal 2002, already underway, spending on discretionary programs is slated to climb 13%. That's a far cry from the 4% hike Bush initially proposed, and it doesn't even include any "emergency" funds and "supplementals" likely to get tacked on as the year goes by.

Even that vastly understates the true extent of federal profligacy. If discretionary programs had been allowed to grow with inflation since 1998, we'd be spending $624 billion this year. Actual spending: $733 billion. In other words, had Congress shown a modicum of spending restraint over the past four years, it could have given taxpayers twice as much in tax cuts this year and still run a budget surplus.

But you never hear about this because of the way the federal budget is put together. Last year's spending simply becomes this year's "baseline." Any promises to control spending down the road are forgotten as soon as they are made.

Result: if you vastly overspend in one year, you can still be accused of "draconian budget cuts" if you don't add substantially on top of it the next. Small wonder, then, that it is so hard to pass, much less sustain, a tax cut.


TCS Daily Archives