Wednesday, March 15, 2006
The case of the 12 zeros
The Bush administration and the Republican Party seem to have lost all capacity for financial self-control, turning their backs on the GOP's historical record of responsible fiscal management. The Republicans have squandered the huge budget surplus they inherited by spending not just on guns and butter but on guns, butter, and tax cuts. Because of government obfuscation, most Americans don't realize the deep fiscal hole we're in--and the fact that we're still busy digging. As David Walker, the head of the nonpartisan Government Accountability Office, pointed out, "The federal government's obligations, current liabilities, and unfunded fiscal commitments are over $43 trillion and rising. . . . Yes, that's trillions with 12 zeros rather than billions with nine zeros."
The estimated net worth of American families is slightly over $47 trillion, and nearly all of it--90 per-cent--would be needed to cover government's current obligations. And don't think we can grow our way out of this hole. According to the GAO, it would take real double-digit growth over the next 75 years to pay off our current debt--an impossible task, considering that the growth rate during the 1990s boom years averaged just 3.2 percent.
A trillion here, a trillion there. The hole is even deeper because these debt projections exclude the cost of Bush's second-term agenda, which would add over $5 trillion to the deficit over the next decade by making his tax cuts permanent ($1 trillion) and privatizing Social Security ($1.5 trillion in the first decade; $3.5 trillion in the second)--not to mention the tens of billions of dollars likely to be spent on military operations. And all this spending would come at a time when the first baby boomers are on the verge of retiring, causing Medicare and Social Security costs to soar. The president says his budget would cut the deficit in half by 2009. But this is a mirage. Why? Because it excludes the cost of the Iraq war and the cost of his privatization program for Social Security--to name just two whoppers.
What's worse, by cutting on the other side of the ledger, the Bush budget would slash or eliminate programs that affect the quality of life of millions of Americans. Among the proposed cuts: a 12 percent reduction in elementary and secondary education programs; a 14 percent drop in spending on Medicaid, the federal-state program for the poor and disabled; a 20 percent cut for clean water and clean air. Spending on Head Start would be slashed by $3.3 billion, meaning 118,000 fewer kids would be covered by 2010, while the program that subsidizes nutritional assistance to low-income pregnant women and nursing mothers, critical to preventing low-weight babies, would have to reduce the number of women covered by 740,000. At the same time, however, the Bush budget would increase highway spending--the budget's single biggest pork-barrel program--by $284 billion over six years from the current $218 billion. The egregious farm-subsidy program, meanwhile, which benefits huge agribusinesses far more than it helps small family farms, would hardly be touched.
But wait, it gets worse. The real cost of the president's program soars after he leaves office, especially the new prescription-drug program, which has already jumped from $400 billion to an estimated $724 billion in the first decade, as costs increase from $37 billion a year to $110 billion a year. This is just one of many programs whose escalating costs will leave Bush's successors in a vicious budget crunch. Making matters still worse is the fact that reforms of major entitlement programs like Medicare and Social Security are essentially not being addressed. If that remains the case, fiscal catastrophe will be virtually unavoidable.
What's to be done?
We must insist on truth and transparency, and our leaders must tell us clearly the current-value dollar cost of all major spending and tax bills before they are voted upon. We must also bring back basic budgetary controls, such as pay-go rules, that require new spending increases or tax cuts to be paid for by corresponding tax increases or spending cuts. We will need to revise our tax code and then improve our efforts to enforce it so as to collect hundreds of billions of dollars of revenue lost to special tax preferences, in uncollected back taxes, and through tax evasion and abusive tax shelters. Finally, we must bring our health costs under control before they break the nation's fiscal bank. The sooner we act the better. Otherwise, compound interest on the growing debt will eat us up.
The American public gets it. In a recent poll, 90 percent called the deficit a very serious or somewhat serious problem. Which raises a rather interesting question: Where are all those budget hawks when we really need them?
