September 10, 2003

Trouble Ahead

By Alexis Simendinger, National Journal

The nonpartisan Congressional Budget Office released its latest projections for the federal late last month, and the imbalance between what the government takes in and what it spends is now officially expected to come within a gnat's eyelash of half a trillion dollars—in fiscal 2004 alone. And if the government did not have excess Social Security funds to ease the imbalance, the actual figure would be a deficit of $644 billion and counting. That accumulation of red ink represents 4.3 percent of the overall size of the economy—a number that has risen steadily since 2001.

More important, approximate balance in Uncle Sam's budget is seen as unattainable for at least another seven years, and balance would only be possible, CBO reported, if the equivalent of a Washington miracle (existing conditions and current policies remain unchanged for a decade) occurred.

And the August projections are likely to grow bleaker, considering the shelf life of both CBO and Office of Management and Budget estimates over the past five months. "Since CBO last issued baseline projections in March, the budget outlook has worsened substantially," Congress's budget office wrote. "CBO's estimate for this year's deficit has risen by $155 billion, and for next year's by $280 billion."

How could that be? Because Congress passed and President Bush signed another tax-cut bill that reduced revenues by $1 trillion from 2003 to 2013, and projected government spending rose since March to the tune of at least another $1.4 trillion over 10 years. That's without weighing the hefty price tags for a new prescription drug entitlement under Medicare (the legislation is still in conference negotiations and estimated to cost a minimum of $400 billion); war costs in Iraq that are running about $5 billion a month; and the Bush administration's long-term commitment to reconstruct Iraq, an endeavor that appeared more expensive this week as the administration sent its $87 billion supplemental spending request to Capitol Hill.

Most budget analysts see the situation as a simple recipe for calamity in the not-so-distant future. Washington's coffers are smaller; Washington's spending is higher. And when the nation's Baby Boomers begin to retire and draw on Social Security (in 2008) and Medicare (in 2011), a national habit of running big deficits while trimming revenues all but guarantees "crisis" headlines.

"There isn't a political consensus in favor of a balanced budget," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan group founded in 1992 and devoted to fiscal responsibility that protects Social Security, Medicare, and Medicaid. "The administration has made it clear that its priorities come first, and worrying about the deficit comes later.... Everyone wants a balanced budget; no one wants to give up anything to achieve it."

In Concord's world, "the current White House thinking is shortsighted, in that you can get away with deficits for a few years. I wouldn't argue with them when they say the deficit isn't having an impact right now," Bixby said. "But within this budget window, you begin to see the first ripples of the demographic tidal wave." Concord has become a lonely voice in Washington, arguing that Bush and Congress should postpone a new prescription drug benefit—a benefit first pondered during years of surpluses—until the country can afford it.

If the president wins a second term, the election to pick his successor in 2008 will almost certainly dwell on keeping faith with the government benefits promised to the next generation. At that point, Bush would be packing up to return to Crawford, Texas, thinking about his presidential library and his GOP legacy. "I came to office to solve problems, not to pass them on to future presidents and future generations," he told an audience of re-election supporters on June 30. "I came to seize opportunities, instead of letting them slip away."

Democratic presidential contenders and Democrats in Congress hope to weave the bleak budget numbers into voters' anxieties about the economy and unemployment. Few, however, venture specific "tough choices," other than forsaking more tax cuts. From a budgetary standpoint, for instance, adding an expensive prescription drug benefit to the bottom line is uncomfortable, but both parties have invested so much politically that no second thoughts about cost are apparent.

After ticking off a list of pending congressional decisions destined to inflate red-ink spending further, Rep. John Spratt of South Carolina, the ranking Democrat on the House Budget Committee, predicted that Bush's argument that deficits are necessary will become harder to make as the 2004 elections near.

"I don't think he wants to find himself with a half-trillion-dollar deficit, and making it worse," Spratt said in a telephone interview. The campaign could morph into a debate about spending billions of dollars to build roads and bridges in Iraq, at the expense of policies to help Americans out of work at home. "All those pressure points will be felt in the election," Spratt promised.

And will congressional Democrats introduce their own alternative budget fixes? Well, not exactly. "We will be saying it's time for the Bush administration to come up with a plan," the congressman said. "Bush's policies are a big part of the problem. Republicans are in control. It's up to them."