The Washington Post
When President Bush took office, his budget officials estimated the cumulative surplus for the years 2002-11 to be $5.6 trillion. Last week the Congressional Budget Office (CBO) released its outlook for the next 10 years, in which it declared that the cumulative surplus for that 10-year period "has been all but eliminated." And that's before the president's proposed tax cuts or spending initiatives are factored into the budget.
We warned two years ago that the president was betting his budget on a blue-sky forecast and making his tax cuts so large that no margin was left for error. Now we are watching 15 years of fiscal effort unravel.
Faced with deficits as far out as we forecast, the president does not propose a budget summit, as his father did in 1990. He did not even mention the deficit in his State of the Union address. His 2004 budget, released yesterday, offers no solution -- just more of the same, particularly in the realm of tax reduction.
The tax cuts passed in June 2001 took a $1.35 trillion bite out of the surplus. To shoehorn them into the budget, they were written to expire by the end of 2010. The president now wants these tax cuts made permanent. If those and other expiring provisions are made permanent, the deficit will be increased by $617 billion between 2004 and 2013. On top of these tax cuts, the president wants $831 billion more, about half of which would go to exclude dividends from taxation. These two cuts together would exceed the first, and because all the surpluses are gone, every dollar to cover the reduction in revenue would have to be borrowed, adding $1.8 trillion (including interest) to the national debt. The spending increases in the president's budget are not quite as substantial as the tax decreases, but they are sizable:
• Annual defense spending will climb to $400 billion next year and $500 billion before the end of the decade.
• Though not included in the budget, the cost of a war in Iraq and its aftermath would be $50 billion to $100 billion.
• Homeland defense is a whole new account. The budget requests additional resources on top of the funding added since Sept. 11, 2001.
• Some $400 billion is sought over 10 years for prescription drug coverage under Medicare.
• Other, smaller initiatives, such as $15 billion to fight global AIDS, enlarge the total.
We have no quarrel with many of these spending requests. We argue with the notion that we can have it all and ignore the bottom line. We thought it was risky to pass a $1.3 trillion tax cut before knowing whether the $5.6 trillion surplus was likely to materialize. Now that the surplus is gone, we think it is irresponsible to add huge tax cuts on top of big spending increases, with no plan for bringing the budget out of deficit.
When the president came to office, people were debating how to put the Social Security surpluses in a "lockbox" so they could never be borrowed and spent again. The Bush administration proposed a standard: It said preserving surpluses "at least the size of the Social Security surplus" would be the "threshold condition of public finance." Under the budget just submitted, it proposes, without compunction, to borrow and spend all of the Social Security surplus over the next 10 years.
Two years ago we were also seriously debating how much of the $3.5 trillion in national debt could be paid. The president's budget would settle that debate too. Under it, none of the debt could be paid. Instead, over the next 10 years, the president's policies would add $2 trillion to $3 trillion in national debt.
Last September, Federal Reserve Board Chairman Alan Greenspan said, "History suggests that our abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth, and force harder choices upon us in the future." The president's budget threatens just such negative consequences. It would drain the resources needed to meet our long-term commitments to Social Security and Medicare. It would reduce national saving and investment, drive up long-term interest rates for consumers and businesses, and stifle future growth.
At this time of national challenge, we call on the president to respond in a unifying fashion. Like his father, he should convene a bipartisan budget summit. Democrats are ready to sit down with the president and hammer out a plan that puts us back on path toward balanced budgets while achieving our other national priorities.
Sen. Kent Conrad (N.D.) and Rep. John Spratt (S.C.) are the ranking Democrats on the Senate and House budget committees.