NY Times Editorial: “Trim Deficit? Only if Bush Uses Magic”
02/07/2005
By EDMUND L. ANDREWS. NY Times
Published: February 7, 2005
WASHINGTON, Feb. 6 - The economy is growing. Tax revenues are climbing. But can these factors rescue President Bush from a federal deficit that seems stuck above $400 billion?
The answer, unfortunately, is almost certainly no, analysts say.
For all the programs that Mr. Bush is expected to slash in his budget proposal on Monday - from health care and housing aid to Amtrak - the cuts would total less than $15 billion next year and barely dent the deficit.
By far the biggest parts of the budget - Medicare, Social Security and military spending - would be immune from cuts and are expected to grow rapidly for years to come.
On top of that, Mr. Bush’s plan to replace part of Social Security with private savings accounts could require additional trillions of dollars in borrowing over the next several decades.
The cornerstone of Mr. Bush’s budget strategy is a belief that vigorous economic growth, spurred by supply-side tax cuts that were designed to provide incentives for upper-income Americans to produce more wealth, will generate big jumps in tax revenue that gradually reduce the deficit.
At first glance, he would seem to have grounds for optimism. After all, surging tax revenue did come to Washington’s rescue during the economic boom of the 1990’s, pushing the budget from the red to the black. Republican and Democratic budget analysts, however, say that such an event is much less likely this time around. The contrasts are stark:
“I don’t think we are likely to see a repeat of the 1990’s,” said Douglas Holtz-Eakin, the Republican-appointed director of the Congressional Budget Office. “We can’t grow our way out of this.”
When Mr. Bush unveils his budget plan on Monday, White House officials hope to focus public attention on his proposals to cut scores of domestic programs: Medicaid, housing programs and Amtrak subsidies, among others. But while many of those cuts would be severe, their impact on the deficit would be small.
Administration officials have proposed changes they say would reduce Medicaid spending by $60 billion over 10 years, or about $6 billion a year. Mr. Bush would cut spending on community development programs, consolidating 18 programs into 2 and reducing annual outlays from $5.6 billion to $3.7 billion.
Eliminating operating subsidies for Amtrak, which would face intense opposition in Congress, would save about $1.2 billion a year.
In all, Mr. Bush has vowed to cut or eliminate 150 government programs. But Republican Congressional analysts predicted on Friday that those cuts would be unlikely to save more than $15 billion. And even those savings may not materialize.
Last year, Mr. Bush called for cutting or eliminating 65 programs, for a total projected saving of $4.8 billion. But Congress agreed to eliminate only four of those programs, for a savings of less than $200 million.
The other side of Mr. Bush’s equation - higher tax revenues that result from faster growth - is unlikely to fill the gap. Despite strong economic growth and soaring corporate profits last year, federal tax revenues amounted to only 16.3 percent of the total economy, comparable with levels in the 1950’s and far below the level of 21 percent reached during the stock market bubble in 2000.