Krugman: The Vanishing Future

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Fri, 10 Feb 2006 06:13:46 -0800

[Zepps_News] Krugman: the vanishing future

 

 

 

 

Paul Krugman: The Vanishing Future

 

Paul Krugman, The New York Times, February 10, 2006

 

 

At this point we've had six years to grow accustomed to Bush budget

chicanery. What still amazes me, however, is the sheer childishness of

the administration's denials and deceptions.

 

The story begins in 2001, when President Bush was pushing his first

tax cut through Congress. At the time, the administration insisted

that its tax-cut plans wouldn't endanger the budget surplus bequeathed

to Mr. Bush by Bill Clinton. But even some Republican senators were

skeptical.

 

So the Senate demanded a cap on the tax cut: it should not reduce

revenue over the period from 2001 to 2011 by more than $1.35 trillion.

The administration met this requirement, but not by scaling back its

tax-cutting ambitions. Instead, it created fictitious savings by

" sunsetting " the tax cut, making the whole thing expire at the end of

2010.

 

This was obviously silly. For example, under the law as written there

will be no federal tax on the estates of wealthy people who die in

2010.

 

But the estate tax will return in 2011 with a maximum rate of 55

percent, creating some interesting incentives.

 

I suggested, back in 2001, that the legislation be renamed the Throw

Momma >From the Train Act.

 

It was also obvious that the administration had no intention of

abiding by its concession to fiscal prudence, that it would try to

eliminate the sunset clause and make the tax cuts permanent.

 

But it quickly became clear that the budget forecasts the

administration used to justify the 2001 tax cut were wildly

overoptimistic. The federal government faced a future of deficits, not

surpluses, as far as the eye could see. Making the tax cut permanent

would greatly worsen those future deficits. What were budget officials

to do?

 

You almost have to admire their brazenness: they made the future

disappear.

 

Clinton-era budgets offered 10-year projections of spending and

revenues. But the Bush administration slashed the budget horizon to

five years. This artificial shortsightedness greatly aided the

campaign to make the 2001 tax cut permanent because it hid the costs:

since budget analyses no longer covered the years after 2010, the

revenue losses from extending the tax cut became invisible.

 

But now it's 2006, and even a five-year projection covers the period

from 2007 to 2011, which means including a year in which making the

Bush tax cuts permanent will cost a lot of revenue — $119.7 billion,

but who's counting? Has the administration finally run out of ways to

avoid budget reality?

 

Not quite. As the Center on Budget and Policy Priorities points out,

until this year budget documents contained a standard table titled

" Impact of Budget Policy, " which summarized the effects of the

administration's tax and spending proposals on future outlays and

revenues.

 

But this year, that table is missing. So you have to do some

detective work to figure out what's really going on.

 

Now, the administration has proposed spending cuts that are both cruel

and implausible. For example, administration computer printouts

obtained by the center show that the budget calls for a 13 percent cut

in spending on veterans' health care, adjusted for inflation, over the

next five years.

 

Yet even these cuts would fall far short of making up for the revenue

losses from making the tax cuts permanent. The administration's own

estimate, which can be deduced from its budget tables, is that

extending the tax cuts would cost an average of $235 billion in each

year from 2012 through 2016.

 

In other words, the administration has no idea how to make its tax

cuts feasible in the long run. Yet it has never, as far as I can tell,

allowed unfavorable facts to affect its determination to make the tax

cuts permanent. Instead, it has devoted all its efforts to hiding

those awkward facts from public view.

 

At this point the administration's budget strategy seems to be simply

to ignore reality. The 2007 budget makes it clear, once and for all,

that the tax cuts can't be offset with spending cuts. But Bush

officials have decided to ignore that unpleasant fact, and let some

future administration deal with the mess they have created.

 

--

 

" Now, by the way, any time you hear the United States government

talking about wiretap, it requires -- a wiretap requires a court

order. Nothing has changed, by the way. When we're talking about

chasing down terrorists, we're talking about getting a court order

before we do so "

-George W. Bush, April 20, 2004

 

Pay your taxes so the rich don't have to.

 

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