http://www.oregonlive.com/news/orego...370.xml&coll=7
How can this be? President Bush has pushed through several rounds of tax cuts and he's spending boat loads of baksheesh on the Iraq war. Republicans and Democrats alike tell us federal spending is out of control, and the media focus largely on the economy's negatives: housing and gasoline prices. Yet there Bush was this week submitting a budget with deficits that go down until there is, voila, a budget surplus?

How is this happening?

Heck, is it even happening? After all, Bush is the only one talking up the fact that the federal deficit is going down, so can it be true?

Well, it is. The deficit went from a projected $521 billion in 2005 to $248 billion in 2006. And the projected deficit for the current fiscal year is $244 billion.

Of course, those numbers are not all that meaningful. Uncle Sam's red ink must always be viewed in relationship to the whole economy. This fiscal year's projected deficit will be 1.9 percent of gross domestic product, and the president's budget for 2008 puts the federal deficit at 1.6 percent of GDP.

How do those deficit-as-a-percentage-of-GDP figures stack up? Well, when Bush promised in his 2005 State of the Union address to cut the deficit in half by 2009, the projected deficit of $521 billion totaled 4.5 percent of GDP. The 1992 deficit was 4.7 percent of GDP. The recession-racked 1983 deficit came in at 6 percent of GDP.

But anyone can cherry-pick a few years to pretty up an administration's red ink, right? Right. Year-to-year comparisons can provide context, but they can just as easily facilitate spin. Averages can provide a truer picture, and here's what Rob Portman, director of the Office of Management and Budget, pointed up Monday: "This deficit is below the 40-year historical average of 2.4 percent of GDP and is smaller than the deficit as a percent of GDP in 18 of the previous 25 years."

So the federal deficit is going down in both nominal terms and as a share of the U.S. economy. What gives? Have Bush and Congress cracked down on runaway spending? A bit, yes. Yet here's what really gives -- or continues to give the federal government more money: the U.S. economy.

It's going gangbusters. Last quarter the economy revved on with a 3.5 percent growth rate, and last year it expanded by 3.4 percent. That's an increase from its 3.1 percent growth the previous year.

We've had 42 consecutive months of consecutive economic growth, as well as 13 percent GDP growth and the creation of 7.3 million jobs since the second round of Bush tax cuts in 2003.

A booming economy and bull markets, low inflation, impressive job- and hourly-wage growth; it is, National Review Online's Larry Kudlow has written, "the greatest story never told."

The result: Tax collections are pouring into the U.S. Treasury. Last year revenues jumped by 11.8 percent. The year before they went up by 14.5 percent. The 2008 budget that Bush released this week estimated revenue growth at 5.5 percent this coming year.

A rosy scenario? Maybe, though it's worth noting that the administration predicted tax revenue would grow by 5.5 percent in this fiscal year's first quarter. The actual first collections came in at 8.2 percent.

Of course, the president's new budget projects continued declining deficits and even a budget surplus by 2012 -- while simultaneously making the Bush tax cuts permanent.

That all sounds terrific. But five-year-out budget predictions are for economists and budgeteers. The rest of us live in the real world. Budgeting one or two years out is dicey enough. Bush couldn't have predicted, say, 9/11 and the ruin it visited on the U.S. economy or the fiscal toll the war on terror would take on federal and state budgets. Neither can a president or congressional budget-writers predict what economic or security challenges we'll face a few short years from now. In short, nobody should hold their breath waiting for a surplus in 2012.

That said, the burden of proof is on those who oppose making the Bush tax cuts permanent. It's hard to argue with economic and fiscal success, however unhailed it may be. The last thing a humming economy in the here and now needs is a huge tax hike.

And liberals let the spin begin

Gixyboo already provided the conservative version of VOODO ECONOMICS with this thread.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

The Bush Budget Deficit Death Spiral
by Robert Freeman

Lenders talk about a “debtor’s death spiral.” It occurs when borrowers get so far in over their heads they begin borrowing money just to cover the interest payments on past borrowings. The borrowers have to do this to keep the lending flowing but they can no longer plausibly pay down the principal. As new debt compounds on old, bankruptcy becomes imminent. Further lending is foolhardy. Foreclosure is only a matter of time.
The U.S. is starting to look like it is entering just such a death spiral. It is foretold not simply by the large and growing deficits, nor by the fact that their carrying costs will rise quickly as interest rates rise. Rather, it is the fact that these trends are becoming irreversible, a structural part of the U.S. economy.

When the ultimate collapse will occur, whether it comes with a bang or a whimper, how it will be triggered, and how severe it will be are as yet unknown. But as Herbert Stein, Chairman of the Council of Economic Advisers under Richard Nixon was fond of saying, “Things that can’t go on forever, don’t.”

The first signs of impending trouble are the exploding budget deficits themselves. They began, of course, under the parlous economic stewardship of Ronald Reagan. Reagan cut the marginal tax rate on the wealthiest of Americans from 70% to 38%. He promised it would spur an orgy of investment and rocket the economy to new levels of production and prosperity. Instead, his “supply side economics” did the exact opposite. It produced the deepest recession since the Great Depression.

Output fell 2.2% in 1982 while budget deficits soared. When Reagan took office in 1981, the national debt stood at $995 billion. Twelve years later, by the end of George H.W. Bush’s presidency, it had exploded to $4 trillion. Reagan was a “B” grade movie actor and a doddering, probably clinically senile president, but he was a sheer genius at rewarding his friends by saddling other people with debts.

Bill Clinton reversed Reagan’s course, raising taxes on the wealthy, and lowering them for the working and middle classes. This produced the longest sustained economic expansion in American history. Importantly, it also produced budgetary surpluses allowing the government to begin paying down the crippling debt begun under Reagan. In 2000, Clinton’s last year, the surplus amounted to $236 billion. The forecast ten year surplus stood at $5.6 trillion. It was the last black ink America would see for decades, perhaps forever.

George W. Bush immediately reversed Clinton’s policy in order to revive Reagan’s, once again showering an embarrassment of riches on the already most embarrassingly rich, his “base” as he calls them. He ladled out some $630 billion in tax cuts to the top 1% of income earners. In true Republican fashion, they returned the favor by investing over $200 million to ensure Bush’s re-election. Do the math. A $630 billion return on a $200 million investment: $3,160 for $1. I’ll give you $3,160. All I ask is that you give me $1 back so I can keep the goodness flowing. Do we have a deal? Republicans know return on investment.

But the cost to the public has been a return to the exploding deficits of the Reagan years. Bush blew through Clinton’s surplus in his first year. The 2004 deficit reached $415 billion, a record. Still, its real size is masked by the fact that Bush has shifted $150 billion from the Social Security trust fund in order to make the shortfall look smaller. It’s like pretending you’re richer when you move money from one pocket to another. Both sums have to be repaid, so the real amount borrowed is the $415 billion “nominal” deficit plus the $150 billion from Social Security or $565 billion.

This shell game with federal trust funds taints all official forecasts about Bush’s deficits going forward. For example, the Congressional Budget Office estimates Bush’s cumulative ten year deficit at $2.3 trillion, to be sure, a breathtaking shortfall from the $5.6 trillion surplus he inherited from Clinton. But as with the yearly number, this one ignores the trust fund sleight of hand, an omission of some $2.4 trillion. When this is added back in, Bush’s ten year deficit leaps to $4.7 trillion, $10.3 trillion short of Clinton’s number.

But even that number is understated because the CBO forecasts are based on current law. Bush’s tax cuts have not yet been made permanent. If Bush is re-elected and the cuts are made permanent, that would add another $3.2 trillion to the shortfall. It was not too long ago that a $3.2 trillion increment to anything would have made sober people’s noses bleed but such figures are mere accounting details to the Big Thinkers in the White House, especially since it will not be their constituents who are paying it back.

Add it all together—the “nominal” deficit, the stealth siphoning from Social Security, and the permanent effects of Bush’s tax cuts—and the 10 year deficit explodes to a mind-boggling $7.9 trillion. Within ten years, the government will owe more than $15 trillion. And this, at precisely the time the government needs fiscal solvency to begin paying the Baby Boomers their Social Security.

This run-up in debt represents the most rapid, predatory looting of public wealth in the history of the world. The interest costs alone will consume the government and, soon, the entire economy. In fiscal 2004, interest costs came to $321 billion against a deficit of $415 billion. So three quarters of all the current year borrowing is spent paying interest on past borrowing. This is the most immediate symptom of the deficit death spiral.

And the situation will only get worse when interest rates rise, as they must. The U.S. has enjoyed an unprecedented period of low rates, the lowest in 50 years. The only direction they can go is up. And they will rise quickly once foreigners, who are more and more the buyers of U.S. debt, become saturated with dollars and begin to eschew additional lending.

This is effectively what happened in the early 1970s when the Arab oil sheikdoms realized that Nixon had decoupled the dollar from gold redemption but was still paying for oil in dollars—essentially paper. The sheiks tripled the price of oil in 1973 and again in 1978. The OPEC “oil shocks” wrought havoc on the American economy, putting a death to the halcyon days of post-World War II economic growth. Today’s oil at $50 a barrel is the modern day enactment of the same implicit disdain for dollars.

The Japanese did the same thing in 1987. For years they had funded Reagan’s massive supply side budget deficits but had been made fools as the dollar was losing 15% a year in value, more than wiping out the 5% return they were receiving on their treasuries. They wisely stopped buying in October 1987, precipitating the greatest one-day U.S. stock market collapse since the Great Depression.

The “dollar overhang” problem caused by Bush’s record budget deficits is compounded by record U.S. trade deficits. Every month, the U.S. economy buys some $50 billion more from the world than it sells, in the act flooding the world with private dollars. These are on top of the public dollars from the budget deficits. The total trade deficit for 2004 will amount to some $680 billion. As recently as 1992, the amount was only $34 billion, a twenty fold increase in just over 10 years, another sign of the spiral.

These “twin deficits”—trade and budget—combine to well over $1 trillion a year of borrowing. Their effect is to bury the world’s economy in dollar debts, dollars that increasingly buy less and less. As mentioned above, no one knows when the world will say, “enough.” Japan holds a reported $1 trillion supply of dollars, China, more than half a trillion. Both have bought dollars—in effect loaning equivalent sums to the U.S.—in order to keep the value of their own currencies low and therefore make their own goods cheaper in American markets.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

The Bush administration claims that both countries will continue to buy dollars so that their own currencies will not rise. But the danger is that once one major player declares it doesn’t want any more dollars there will be a rush for the exits. Demand for dollars, and with it, the dollar’s price, will plummet. The last player holding dollars will be stuck with the bag, a multi-trillion dollar stash of dollar holdings that are worth only a fraction of what they were just a month before.

In other words, there are structural incentives biasing the descent toward chaos rather than order. Already, the dollar is down 19% over the past year, an eerie harkening of the Japanese experience of the late eighties. Its decline is being cagily “managed” by the U.S. Treasury which has muscled foreign central banks into picking up the slack since private foreign buyers have begun to refuse further dollar purchases. Foreign central banks now hold some 40% of total U.S. government debt.

The only way the U.S. government can prevent a stampede is to raise interest rates—the return for holding dollars. And Alan Greenspan has begun this process. But this, of course, increases the carrying costs of the national debt. As if a $7 trillion national debt funded at 4% isn’t bad enough, envision a $15 trillion debt at 10%. Instead of $300 billion a year in interest costs, think of $1.5 trillion. Instead of interest amounting to 3% of GDP, imagine the carnage as it approaches 10%.

The higher rates will put a knife in the heart of an already tenuous recovery, undermining the only process by which payoff might ever be accomplished. It will suck all of the oxygen out of the economy. Economists call this the “crowding out effect” when lending to the government gets priority over private lending. After all, government has the power to tax in order to fulfill its obligations whereas private borrowers do not.

But the market rations shortages by raising prices—interest rates—forcing private borrowers to pay ever more for scarce capital. In this way, markets for private debt mirror markets for public debt. Investment, the foundation of future growth, will be savaged. New roads, hospitals, factories, schools and research will be sacrificed to escalating interest rates borne of stratospheric debt.

This occurred during the deficit-burdened 1980’s when investment grew at an annual rate of only 2.5% versus 6.9% in the surplus-graced 1990’s. And not surprisingly, productivity suffered as well. It grew at a meager 1.4% per year during the 1980’s but almost 50% faster, 2.0%, during the 1990’s.

This is the perverse, inescapable cycle—the death spiral—that comes part and parcel with too much debt. Its relentlessly rising carrying costs steadily erode the possibility of getting out from underneath it. Higher debt loads lead to higher interest rates, which lead to lower investment which leads to slower growth and, ultimately, diminished prosperity. And it develops a runaway, recycling dynamic all its own.

Finally, it is not only the high absolute levels of debt, nor their rapid expansion, nor even the imminence of much higher interest rates that consign the U.S. to the certain oblivion of a deficit death spiral. It is that this toxic combination of circumstances has become structural, irreversible, locked into the very nature of government economic policy. It is like a driver hurtling down a cul de sac and gluing his foot to the accelerator.

The very purpose of the Reagan supply side tax cuts was to funnel more of the nation’s wealth to those already wealthy. This is what David Stockman, Reagan’s Budget Director, meant when he called them a “Trojan Horse.” And they did their job wonderfully.

In 1980, the top 20% of income earners captured 43.7% of all national income. By 1992, at the end of the first Bush administration, their share had risen to 46.9%. Today it is over 49%. Meanwhile, the lowest four fifths of all income earners have seen their share of national income decline. The lowest quintile’s share has shrunk from 4.2% to 3.5%. The second lowest quintile has fallen from 10.2% to 8.8%. The middle quintile has seen its share fall from 16.8% to 14.8%. And the second highest quintile has suffered a decline from 25.0 to 23.3%. It is empirically the case that the rich are getting richer while everyone else is getting poorer.

The problem this holds for national economic management is that the rich consume a much lower percentage of their income than do those who are not rich. How many cars can you drive at one time, anyway? The rich are also the most likely to spend what money they do on foreign luxury goods, take foreign vacations, make investments in foreign countries, or just let the money sit in the bank.

The poor, working, and middle classes, on the other hand, spend virtually everything they earn. The car needs new tires, the kids need new shoes, the washing machine needs fixing, they’re two months behind on the rent and three months behind on the credit cards. In all of these ways, income shifted through the tax code to middle and lower quintile earners is quickly spent while income shifted to the wealthy is not. This is not class warfare. It is Economics 101.

It is personal consumption—spending—that generates 67% of GDP. If more of the nation’s income goes to those who do not consume its output, while those who do consume it have less and less income, a structural shortfall emerges where there is simply not enough purchasing power to sustain GDP. GDP will ratchet steadily downward in mirror image to the rate at which national income is transferred upward.

The only recourse is for the government to step in to pump up demand. This is the role the deficits play in sustaining GDP. This is why deficits exploded under Reagan, Bush I, and Bush II, all of whom cut taxes on the rich, but declined under Clinton who raised them. Rising public deficits are necessary—in fact, indispensable—to sustaining GDP because so much of the nation’s wealth has been transferred from those who, as a matter of necessity, spend it to those who, as a matter of taste, do not.

Supply side economics (and that includes Bush’s ill-disguised variant) rests on the repeatedly disproved faith that investment and prosperity are caused by giving ever more of the nation’s wealth to the already wealthy. As long as this lunacy continues to drive tax policy, the government will keep expanding federal deficits. Eventually, possibly soon, this will cause a collapse of the dollar that can only be reversed by raising interest rates. But that will explode the carrying costs on the by-then mammoth debts, vitiating private sector investment. And that will kill all future prospects of meaningful growth.

This is the essence of the Bush budget deficit death spiral. To be sure, the debts are an unequalled bonanza for those few who lend the money, for they get to do so at ever-higher rates of interest. But it is a death sentence for all the rest of the economy.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

well i guess that the budget deficit has been going down year over year for the last three years while spending has been proportionaly higher year after year doesn' prove anything does it rasta....

the only voodoo we have heer is that shit your smoking

The only one going down is Bush servicing Cheney! The Bush economy is classice Reagan Republican Voodoo Economics.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

Democrats assail Bush's budget, deficit

http://www.usatoday.com/news/washing...m-budget_x.htm

WASHINGTON (AP) — Democrats are attacking President Bush's budget for worsening the already bleak deficit picture, even as a new congressional analysis of his fiscal plans shows no end in sight for huge amounts of red ink.

Sen. Kent Conrad said President Bush's budget will pass on "a crippling and growing debt" to future generations.
By Tim Dillon, USA TODAY

A report Friday by the nonpartisan Congressional Budget Office said under Bush's budget, federal deficits over the next 10 years would get no lower than a projected $229 billion in 2010. It excluded the potential costs of Bush's plan to revamp Social Security, any costs for wars in Iraq and Afghanistan after this year, and other possible expenses.

The CBO also raised new questions about the president's ability to meet his goal of halving federal deficits by 2009.

The report projected a deficit that year of $246 billion. That would meet Bush's target of halving the $521 billion shortfall he projected for last year — a figure that ended up being $109 billion too high. But it would not be close to cutting last year's actual, record $412 billion deficit in half.

"The president talks about not wanting to pass burdens to future generations," Sen. Kent Conrad of North Dakota, senior Democrat on the Senate Budget Committee, said in his party's radio address Saturday. "But his budget does precisely that — passing on a crippling and growing debt to our children and grandchildren."

Conrad said Bush's plan for creating private savings account as part of Social Security will only "dig the hole deeper" because he would borrow money to set them up.

"We've got to save and invest now to strengthen the economy for the future, keep Social Security and Medicare solvent, and prevent more difficult choices down the road," Conrad said.

Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee, said the report's "deficits paint a dismal picture, which the president's budget only makes worse."

The new figures were released days before the House and Senate Budget committees plan to write their own spending plans for the coming year.

The panels' chairmen, Rep. Jim Nussle, R-Iowa, and Sen. Judd Gregg, R-N.H., have been hunting for GOP support for packages following Bush's proposals to restrain spending and halve deficits.

Friday's figures helped highlight the longer-term budget problems that lie ahead as the 78-million-strong baby boom generation starts retiring later this decade and drawing on already costly programs like Social Security and Medicare.

On Wednesday, Federal Reserve Chairman Alan Greenspan told Congress that federal deficits had become "unsustainable" and urged lawmakers to act quickly to stanch the red ink.

"In the near-term we're doing exactly what we should be doing — bringing the deficit down steadily," said Noam Neusner, spokesman for the White House's Office of Management and Budget. "As we do that, we will also turn our attention to the long-term deficit challenge."

The CBO report said Bush's budget would yield deficits totaling $2.58 trillion during the 10-year period ending in 2015. That is $1.6 trillion higher than they would be if none of the president's fiscal plans become law, it said, the chief factor being his intention to make already enacted tax cuts permanent.

The congressional report said cumulative deficits over the next decade will be $125 billion worse than it estimated only in January. That is largely because it has added $70 billion to its projected 10-year costs of Medicare spending, about 1% more, including $54 billion more for the costs of prescription drug coverage.

Bush's budget projected figures only for the next five years. He projected deficits through 2010 totaling nearly $1.34 trillion — $57 billion less than the CBO estimated.

It also projected that Bush's fiscal plans would yield deficits of $394 billion this year and $332 billion in 2006.

That was lower than the $427 billion and $390 billion shortfalls the White House has projected for those years.

The CBO noted, however, that keeping next year's military operations at current levels would probably add about $40 billion to the 2006 deficit, pushing it to perhaps $375 billion.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

Bush Plan Would Raise Deficit by $1.2 Trillion, Budget Office Says

Bush Plan Would Raise Deficit by $1.2 Trillion, Budget Office Says

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By EDMUND L. ANDREWS
Published: March 4, 2006
WASHINGTON, March 3 — President Bush's budget would increase the federal deficit by $35 billion this year and by more than $1.2 trillion over the next decade, the Congressional Budget Office reported on Friday.

The nonpartisan budget office said that Mr. Bush's tax-cutting proposals would cost about $1.7 trillion over the next 10 years and that his proposals to partly privatize Social Security would cost about $312 billion during that period.

The office also said Mr. Bush's proposals to save money on Medicare, Medicaid and most nonmilitary programs would offset about one-third of the cost of his other proposals.

The report comes as Republican leaders in Congress prepare to settle on their own budget for next year, which could differ substantially from Mr. Bush's. They are already running into political and economic obstacles as they try to extend Mr. Bush's tax cuts, pay for the war in Iraq and squeeze spending on antipoverty programs, education and most other areas of nonmilitary spending.

Senate Republicans, nervous about their prospects in this fall's midterm elections, are balking at Mr. Bush's proposal to trim $36 billion over five years from Medicare, the government health program for the elderly.

House and Senate leaders remain bogged down over a limited extension of Mr. Bush's tax cut for stock dividends, and Senate Republicans have repeatedly failed in efforts to permanently repeal the estate tax.

At first blush, the Congressional Budget Office's report appears optimistic because it envisions that the budget deficit will slowly decline from $371 billion this year as economic growth generates more revenue and as Mr. Bush's budget cuts take effect.

Measured as a share of the total economy, the budget deficit would decline to about 1 percent in 2011 from 2.8 percent this year. Though the government would still be borrowing money each year, the annual deficit would be low by historical standards.

But the budget office noted that it had not included money for military costs in Iraq and Afghanistan after this year. The Bush administration has asked for a total of $92 billion in supplemental spending this year for those efforts.

Mr. Bush's budget also omits any cost for preventing a huge expansion of the alternative minimum tax, a parallel income tax that is expected to engulf tens of millions of people over the next several years.

Mr. Bush's budget assumes that the government will reap well over $1 trillion from the alternative minimum tax over the next decade, but Republicans and Democrats alike have vowed to prevent that from happening.

The optimistic outlook also assumes that Congress freezes or cuts the vast majority of discretionary government programs outside of military and domestic security ones.

Mr. Bush's 2007 budget would cut $2.1 billion next year from education, which had been one of the president's areas for increased spending. It would also cut money for community development block grants, low-income housing, child-support enforcement against deadbeat fathers and scores of other programs with support in Congress.

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.

The amazing disappearing budget

http://http://money.cnn.com/2004/01/...ection_budget/

Bush's 2005 plan will pledge to halve the deficit by 2009 -- but that could be an illusion.
January 26, 2004: 5:39 PM EST
By Mark Gongloff, CNN/Money staff writer



NEW YORK (CNN/Money) - Like a cowboy-boot wearing David Blaine, President Bush has promised to perform an amazing feat of prestidigitation: he's going to saw the whopping federal budget deficit in half in just five short years.

But some observers warn the budget proposal he will submit Feb. 2, which will include projections of a greatly reduced deficit by 2009, will be little more than smoke and mirrors -- unless he and Congress can show a lot more fiscal discipline than they have recently.


The Congressional Budget Office estimated Monday that the federal budget deficit would swell to $477 billion this year, a record in terms of the sheer number of dollars involved, amounting to 4.2 percent of gross domestic product (GDP), the highest level since a record 4.8 percent in 1986.

In his State of the Union speech last week and in other public appearances, President Bush and members of his administration have promised to cut that deficit in half by 2009 -- by spurring faster economic growth that will lead to higher tax revenue, and by Bush's pledge to hold the line on spending.

But Bush hasn't offered any more specifics for cutting the deficit, and -- according to some analysts -- what plans he has proposed seem more likely to grow the deficit, including:


making tax cuts permanent


privatizing Social Security


establishing a permanent base on the moon, followed by manned missions to Mars


tax credits for health insurance


worker training programs


prisoner rehabilitation programs

"With all these new programs, the administration's contention that the deficit will be cut in half in the next five years is a tall tale, derived in large part by omitting very likely or inevitable costs, including costs for proposals the administration itself hopes and intends to support," Keith Ashdown, spokesman for Taxpayers for Common Sense, a Washington watchdog group, wrote recently.

Related stories

Greenspan to get tough on deficit

Dean: Greenspan too political

Surprise: Dems better for rallies

Conservatives grumbling at Bush

The state of the Bush economy

Debating the tax cuts



Ashdown told CNN/Money that, while the Mars proposal could very well be killed -- a "sacrificial lamb" to appease fiscal conservatives -- the president's budget will also not include the impact of a transportation bill that could cost as much as $375 billion and could be passed this year.

Ashdown and others also noted that Bush's budget will not include any more spending for the war in Iraq and the continuing U.S. involvement in Afghanistan. Instead, Bush is likely to delay asking for that money until after the election. Some analysts have estimated such costs will be about $50 billion or more a year.



Jeremy Siegel of Wharton School of Business talks about budget deficits and whether tax cuts were a mistake.


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The budget also will not include the effect of reforming the alternative minimum tax (AMT) to cut the number of people it affects, which the CBO has estimated will add $172 billion to the deficit through 2009. Such a reform is likely to be passed, according to many analysts.

Meanwhile, the liberal Center on Budget and Policy Priorities, a Washington think tank, warns Bush may not include increased spending for a future Pentagon build-up and anti-terrorism efforts, noting he excluded such costs from his last budget proposal.

"The administration's forthcoming budget is expected to have approximately $200 billion in missing costs in the fifth year," CBPP analysts Richard Kogan and Martha Coven wrote recently. "Once these missing costs are taken into account, the deficit is seen as being in the range of $500 billion in 2009, or around 3.5 percent of GDP. That is not close to cutting the deficit in half."

'Fiscal child abuse'
The CBPP and many Democrats say the tax cuts passed by Congress and pushed by Bush the last three years are responsible for much of the current fiscal mess. All of the Democratic presidential candidates call for rolling back at least the tax cuts for the wealthy.

Some conservatives, on the other hand, say the tax cuts should stay in place, claiming they'll help to narrow the deficit, and that spending should be cut instead.


To appease them, Bush has promised to hold growth in discretionary spending outside of defense and homeland security -- stuff like agriculture and education -- to just 1 percent in 2005. This promise was met with skepticism by some conservatives, who noted that such spending makes up less than 20 percent of total government spending.

"If everything else grows super-fast, and such a small portion of the budget grows at 1 percent, big deal," said Veronique de Rugy, a policy analyst at the Cato Institute, a fiscally conservative think tank in Washington. Congress will likely authorize more spending than the president proposes, anyway, she said, noting it has in recent years.

She also scoffed at Bush's pledge to hold total discretionary spending growth to just 4 percent, noting that Bush's father and President Clinton were able to keep such spending growth lower and even to cut it in some years.

What's more, spending on Social Security and Medicare -- "mandatory" budget expenditures -- will skyrocket by the end of the decade, as millions of baby boomers begin to retire, de Rugy and other analysts say.

"This is like running up a credit card debt and asking our kids to pay for it in the future -- it's fiscal child abuse," de Rugy said.

Tough political choices
Some analysts doubt the problem can be solved simply by raising taxes or cutting spending -- both may be necessary. U.S. comptroller general David Walker, a Republican, said last week that Social Security and Medicare growth would have to be cut, along with other spending, and that some taxes might have to be raised, in order to contain the deficit.

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Some observers have said deficits don't matter, noting the economy survived enormous deficits under President Reagan, and claiming the economic boom of the 1990s may have been due, in part, to deficit spending.

But Reagan, the first President Bush and President Clinton all raised taxes in different ways to help stem the deficits, while Congress kept spending growth tightly under control during the first Bush and the Clinton administrations.

And considering the looming obligations under Social Security and Medicare, deficits could grow much larger and become much more economically risky in future years, if corrective measures aren't taken soon, according to recent studies by the International Monetary Fund, the Brookings Institute, a liberal think tank, and Goldman Sachs.

"It defies common sense and lots of careful research to think that the highest-rated credit on the planet can borrow half a trillion dollars a year without pushing aside some private investment and ultimately hurting productivity growth," Goldman Sachs economist Ed McKelvey wrote in an oft-cited research note in November.

But since the necessary remedies are politically unappetizing -- especially in an election year -- the deficit will likely keep growing, McKelvey wrote, slowly but steadily undermining the economy's growth potential.

"The real problem is that the effects on growth and productivity are corrosive rather than catastrophic," he wrote. "This is why the deterioration in federal finances is so insidious."

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AMERICA LAND OF THE FREE HOME OF THE BRAVE--BECAUSE OF OUR CONSTITUTION.