On March 3, the
Congressional Budget Office (CBO) (PDF) released their analysis of Bush's 2007 budget. Once again, the Republicans are demonstrating their fiscal responsibility by increasing the nation's deficit. Once again, they will claim otherwise and the press will probably buy it without questioning a single thing.
First, let me explain a bit about the budget process. In January of every year, the Congressional Budget Office performs a standard analysis of the US budget situation. A statute mandates this analysis. In a nutshell, the CBO projects that all current law remains the same and the spending levels will increase at certain levels. This is called the baseline budget, and it is used as a comparison of all other proposals put forward.
The proposals of the President's budgets would add $35 billion to the deficit that CBO currently projects for this year, reducing revenues by nearly $9 billion and boosting outlays by $27 billion (mostly for military operations in Iraq and Afghanistan).
Once again, the White House has kept the actual cost of the war off the nation's official books, instead relying on the special appropriations process which has far less Congressional oversight. They have done this every year since military operations began and no one appears to be concerned that Bush is getting huge chunks of money without discussing where the money is going (now you know how the administration funds the rendition program, it's media plans and a host of other activities).
But, that's not the really scary part of Bush's budget.
Deficits under the President's budget would total 2.1 trillion over the 10 years from 2007 through 2016 - 1.4 trillion higher than under current law, as projected by the CBO's baseline.
Under current tax and spending laws, deficits would be followed by small surpluses beginning in 2012, CBO projects; under the President's policies, by contract, deficits would continue throughout the 2007-2016 period. Over those 10 years, the President's proposals would reduce revenues by more than 1.7 trillion from baseline levels, CBO and JCT (Joint Committee on Taxation) estimate, mainly by extending tax provisions that are scheduled to expire by 2011.
The central problem with Bush's budgeting process is his tax cuts have cut government revenues while increasing government expenditures. Revenues have dropped from 20.9% of GDP in 2000 to 17.5% of GDP in 2005. Over the same time period, government outlays have increased from 18.4% of GDP to 20.1% of GDP. The drop in revenue is largely caused by the drop in individual income tax receipts, which declined from 10.3% of GDP (or about 1 trillion) in 2000 to 7.5% of GDP in 2005 (or 927.2 billion) in 2005. To make up for this difference, total federal debt outstanding has increased from 5.6 trillion in 2000 to 8.2 trillion currently.
Bush in under the laffer curve delusion that tax cuts will eventually pay for themselves. The CBO's recent budget analysis - along with history of individual tax revenue - clearly refute this contention. Even Treasury Secretary Snow has admitted that tax cuts don't pay for themselves:
Q: In terms of the budget deficit, federal revenues are at historically low levels as a percentage of GDP. Given that Congress has done little to control spending over the last five years, why isn't adjusting or forgoing the tax cuts on the agenda?
A: But you're right, tax cuts -- I don't know anybody that says tax cuts fully pay for themselves with the feedback through receipts ... But well-conceived tax cuts give you higher growth rates than you otherwise would have. Even if they don't pay for themselves, they raise the prosperity of the country.
Bush is essentially promising something for nothing. The US can have a war - a very expensive proposition -- entitlement increases and lower taxes, and it will all be OK in the long run. What Bush fails to realize is reality clearly refutes his thinking. Not that he has ever been interested in history...