Fiscal Ruin on the Horizon
By David S. Broder
It's not true that people in Washington can't agree about anything.
Across the policy spectrum, there's a clear recognition that the
present path of budget-making is unsustainable -- in fact, ruinous.
The Concord Coalition, whose leadership includes prominent
Republicans, says that with realistic assumptions but no change in
policy, the federal debt will swell by a staggering $5 trillion in the
next 10 years. The liberal Economic Policy Institute says that a
"budget train wreck" lies ahead. The nonpartisan Congressional Budget
Office warns that it looks as if "substantial reductions in the
projected growth of spending or a sizable increase in taxes -- or both
-- will probably be necessary" to avoid fiscal disaster.
The agreement extends everywhere except where it is most important --
to the rivals for the White House and to the members of Congress.
President Bush and his opponent, Sen. John F. Kerry, blithely assert
that they will cut the budget deficit (a record $413 billion in the
current year) in half within four or five years, but they are purposely
vague on how they will do it.
Meanwhile, Congress has retreated further and further from any
pretense of fiscal responsibility. When they went home to campaign last
week, the lawmakers executed what Stan Collender, a prominent budget
expert, called a "triple dive." They recessed "having failed to pass
the fiscal 2005 budget resolution, all but four of the 13 regular 2005
appropriations and a needed increase in the limit on the national
debt," so the Treasury can sell bonds to our creditors.
"This three-part failure," Collender said, "is the best evidence yet
that Congress has become either unwilling or unable to deal with the
federal budget. It has abrogated its fiscal responsibilities at every
step in this year's debate except when the decisions -- like a tax cut
-- were politically easy."
Tax cuts they can do. With bipartisan majorities, they passed a $143
billion bonanza for corporations of every sort, shortly after extending
what the lawmakers were pleased to call a "middle-class" tax cut of
$146 billion. You might be surprised to learn, as I was, where that
"middle class" tax relief actually goes.
According to the Center on Budget and Policy Priorities and the Urban
Institute-Brookings Institution Tax Policy Center, households in the
middle 20 percent of the income scale -- the "middle class" -- receive
only 9 percent of the benefits. Their average saving will be $162.
Those in households with incomes from $200,000 to $500,00 will be
$2,390 better off.
It is important to remember that these latest tax cuts are all being
financed with borrowed money -- money that at some point will have to
be paid back. That was the point made by Pete Peterson, the former
Nixon administration secretary of commerce, in a terrific piece that
business reporter Paul Solman did for PBS's "NewsHour With Jim Lehrer"
the other night.
Noting that today's deficits will burden future generations,
said, "The ultimate test of a moral society is the kind of world it
leaves to its children. And as I think about the concept that we're
slipping our own kids and grandkids a check for our free lunch, I say
we're failing the moral test."
Morality aside, there's the little matter of piling up even more IOUs
instead of the savings that will be needed to finance the retirement
and health care costs of the 77 million baby boomers now approaching
retirement. That responsibility ought to weigh heavily on everyone
running for federal office, but it is hard to find a campaign where it
is being discussed with any degree of candor and realism.
It would be nice to pretend that once next month's election is out of
the way, the winners will buckle down and address this crisis. But both
Collender and Philip Joyce, a George Washington University professor,
suggest that the whole budget-making process in Congress may be on the
verge of breakdown.
As Joyce put it in an article for a forthcoming scholarly journal,
"The failure of the Congress to agree on a budget resolution for three
recent fiscal years -- 1999, 2003 and 2005 -- suggests that the budget
process may be at a crisis point, and this crisis may be exacerbated by
the uncertainty associated with the cost and the duration of the war on
terrorism. If a consensus is not reached on a goal for fiscal policy,
the budget committees and the budget resolution are in danger of
This would be a dangerous time to lose the best tool for dealing with
our fiscal mess.