Wednesday, July 12, 2006

New York Times Editorial - Dodgy budget

New York Times Editorial - Dodgy budget
Copyright by The New York Times
Published: July 11, 2006

The release of the White House midsession budget review is a regular event normally marked by a few wonkish observations and the routine updating of various spreadsheets, not by a full-dress presidential dog-and-pony show. But President George W. Bush decided to preside with members of Congress and invited guests in attendance - just in time for the fall campaign.
This is proof, if anyone still needed it, that this administration is desperate for something to boast about. On Bush's watch, triple-digit budget surpluses have turned into annual triple-digit budget deficits. There's no information in the midsession report to alter that utterly dispiriting fact.

Yes, the report is expected to project that this year's deficit will be somewhat less gargantuan than last year's - probably somewhere between $280 billion and $300 billion, versus a $318 billion shortfall in 2005. That's not much to crow about. But Bush is likely to gloat, anyway. Earlier this year, the administration conveniently projected a highly inflated deficit of $423 billion. With that as a starting point, the actual results can be spun to look as if they're worth cheering.

The razzle-dazzle doesn't end there. In his radio remarks on Saturday, Bush credited tax cuts for a projected "surge" in tax revenue. The Treasury is expected to take in about $250 billion more in 2006 than in 2005, for a total take of $2.4 trillion. Devoid of context, the number looks impressive. In fact, it is $100 billion less than the $2.5 trillion revenue estimate the administration touted when it set out in 2001 to sell its policy of never-ending tax cuts.

Even with this year's bigger haul, real revenue growth during the Bush years will be abysmal, averaging about 0.3 percent per capita, versus an average of nearly 10 percent in all previous post-World War II business cycles. That might be excusable if the recent revenue improvements could reasonably be expected to continue. They cannot. Much of the increase in tax receipts is from corporate profits, high-income investors and super high-earning executives - sources that are just as unpredictable as the financial markets to which they're inevitably linked.

So, the revenue surge is neither a sign that the tax cuts are working nor of sustainable economic growth. A growing number of economists, most prominently from the Congressional Budget Office, point out that upsurges in revenue are also the result of growing income inequality in the United States, an observation that is consistent with mounting evidence of a rapidly widening gap between the rich and everyone else.

It would make sense to use some of the windfall revenue to enact policies and programs that tilt against growing inequality. Unfortunately, Bush is flogging more tax cuts that will deepen the divide.


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