The most important thing to remember about Congressional Budget Office projections that the U.S. government faces a record deficit next year and more deficits until at least 2012 is that these deficits are driven not by tax cuts but by increased spending and economic sluggishness. Rolling back the Bush administration’s modest tax cuts — most of which have not even kicked in yet — is more likely to aggravate than to improve the situation.
The Congressional Budget Office reported last week that it expects a record federal deficit of $480 billion in 2004 — it estimated “only” $200 billion as recently as March — and the deficits will continue until 2012 or 2013, leaving an accumulated debt of almost $1.4 trillion. And that doesn’t even include whatever the administration plans to spend bringing the blessings of democracy, Pentagon-style, to Iraq.
Projections for 10 years from now should be taken with large mounds of salt, of course. Only a few years ago all the budget “experts” were predicting surpluses as far as the eye could see. But the projections for this year and next are likely to be reasonably accurate, if probably a bit understated. And that’s cause for alarm, since the shortfall will have to be made up eventually.
The largely untold story behind the deficit is that a Republican administration and Republican-majority Congress have increased real federal spending by $404 billion over the past five years. That amounts to the most dramatic expansion of government in the past 50 years.
As the conservative Heritage Foundation analyzes the federal budget, the national government was spending $16,000 per household in 1998 and will spend $23,000 per household in 2003. And despite the image one might get from history and the media, the Republicans have not been slashing domestic programs to fund military spending. About two-thirds of the spending increases over the last five years have been in domestic programs.
The first lesson is that an expansive Medicare prescription drug benefit is simply unaffordable just now. Congress and the administration need to get that message pronto. Then they need to look carefully at our ambitious plans around the world and set priorities with an eye toward affordability.