The Pentagon won't seek more money from Congress this year to pay for operations in Iraq and Afghanistan. But in early 2005, shortly after Bush or a new president is sworn in, the Defense Department likely will seek additional money — as much as $50 billion — to finance the war.
The Bush Administration revenue projections are not to be trusted. Daniel Gross lays out the history of Bush Administration overestimates of expected tax revenues.
In February 2002, the administration projected that revenues for Fiscal 2003, which ran from October 2002 to September 2003, would be $2.048 trillion—5 percent higher than the by-then reduced estimate for 2002. (See Table S-1 on Page 395.) Instead, as shown in the tables accompanying today's budget message, they came in at $1.782 trillion—13 percent below the estimate.
In February 2003, the administration predicted that Fiscal '04 revenues would grow from an estimated $1.836 trillion in Fiscal 2003 to $1.922 trillion in Fiscal 2004—up 4.6 percent. (See Table S-1.) But today, the estimate for Fiscal 2004 was cut by 6.5 percent, to $1.798 trillion. Detect a pattern?
Bush's revenue projections are at least as optimistic as those for spending. The White House expects revenue gains of 13.3% in 2005, a pace not matched even in 2000, when the capital-gains tax windfall reached its zenith. Thereafter, Team Bush projects a steady slowing in revenue growth. But the projected 8.3% gain in 2006 is still well above average -- and over twice the forecasted pace of GDP growth.
They claim, of course, that they will eliminate up to 65 federal programs and cut many others. But the White House has already announced the National Endowment for the Arts has escaped the budget axe because of its importance to the nation. Frankly, if there are 65 less important programs, I’d like to see them.
Let us be realistic. When is the last time (if ever) that a single federal budget eliminated even two dozen programs let alone over five dozen? Bush has proposed many savings that will not be enacted by Congress. So his budget estimate is also worse than it looks for that reason as well. How many of the proposed funding reductions or outright cancellations will be passed by Congress?
Sixty-three other programs would receive reduced funding under the Bush proposal. In addition, 65 government programs — 38 of them education-related, including those focused on alcohol abuse, the arts, dropout prevention, school counselors and school leadership — would be terminated for a savings of $4.9 billion.
The short term budget outlook is pretty bad. The long term outlook is horrible. The trend toward an aging population makes the long term US federal budget outlook one of large increases in taxes to pay for old folks.
SOCIAL INSECURITY. Americans might worry less about the federal deficit if the well-publicized Social Security problem were close to being solved. But that one hasn't even begun to be tackled. Here's the problem in a nutshell: In 1960, there were 16 workers for every Social Security recipient. Now, that ratio is 3.3 to 1, and by 2030 it will be 2 to 1. Since current workers fund payments to current recipients, "Social Security taxes are going to have to be raised," says Edward Deak, an economics professor at Fairfield University.
While the Democrats are demogoguing about drug company profits the Republican leaders are attempting to bribe old folks to vote Republican. But the cost of bribing the old folks with drugs has just risen by a third and will likely go much higher.
One way we could improve our longer term national financial outlook would be to reform immigration policy to stop the influx of low skilled workers who are part of a growing Recipient Class of people who get more in benefits from the government than they pay in taxes.
|Share |||By Randall Parker at 2004 February 03 02:31 AM Economics Demographic|