The Cranky Advocate's Guide to the Bush Budget and Tax Nightmare

The Budget: Deficits as Far as the Eye Can See

According to an analysis by the highly-respected and nonpartisan Center for Budget and Policy priorities, budget deficits will remain at or above $325 billion for each of the next ten years and total $4.1 trillion over that period. Similar estimates have been given by Wall Street firm Goldman Sachs.

The Bush Administration says that these deficits are "manageable", but it also goes out of its way to make these deficits appear smaller than they are likely to be after 2004 by using rosy estimates, omitting certain costs and --very conveniently -- ending the budget projections in 2008 just as the first of the Baby Boomers start to retire.

How big is that and so what anyway?

Budget deficits will force painful cuts in important social programs. The estimated 2013 deficit will be $530 billion--six times the budget of the Education Department or the Veterans Department, 13 times the annual budget of the Department of Homeland Security and 41 times the budget of the Environmental Protection Agency.

Further, growing interest payments on the national debt will drain funds that could have been used for funding gaps that will occur in the future in Medicare and Social Security.

What's causing the deficit?

The President also says the deficit is caused by the war and the recession. But, in fact, the tax cuts are a much more significant cause. In 2003 and 2004, for example, the cost of the tax cuts is almost three times more than the cost of "war"--even as defined as including homeland security, Afghanistan and terrorism-related costs.

The president's own budget staff [OMB] did a recent review that shows that low tax revenues, not spending, is the main factor behind the jump in the deficit. Income tax receipts, as a share of the economy, could drop to their lowest level since 1943.

Can't the states provide programs cut by Bush and the Congress?

No. States have $80 billion in budget shortfalls for fiscal year 2003 and $79 billion for FY 2004. Because balanced budget laws require them to close deficits, states have been cutting important programs including education, health care and public safety.

States did not spend their ways into this crisis. State spending actually grew more slowly during the 1990s than in previous decades. Most of the growth that did occur was in education, health care, and corrections--areas where costs were rising, need was growing and/or voters were demanding it.

The major cause of the current state fiscal crisis is a steep drop in revenues because of the economic downturn and the erosion of state tax bases as services--which are generally not taxed--become a bigger part of economic activity. States have also lost tax revenue because of the ripple effect of the federal tax cuts.

The Tax Cut: More Money for the Well-Chosen Few

The "official" cost of the tax cuts enacted in May, 2003 is $350 billion through 2013. But this does not take into account the various gimmicks used to conceal the true cost of these tax cuts which is likely to be $800 billion to $1 trillion.

Ok, but what's wrong with a middle class tax cut?

Well, there really wasn't one. The middle class wasn't the focus of these cuts.

The White House used the misleading technique of "averages" to try to get the public to buy in to the plan. The Treasury Department release said that "91 million taxpayers will receive, on average, a tax cut of $1126". But households in the middle of the income spectrum will only receive an average cut of $217; 53% of households--74 million-- will get a cut of $100 or less and 36% will get no tax cut.

Like the first Bush tax bill in 2001, the May 2003 tax legislation is heavily skewed toward the upper end of the income scale. Persons making over $1 million will get a tax cut of $100,000.

Enough already... But it can't get worse, right?

It can and likely will.

First, the House has already voted to make the estate tax repeal permanent. This would add roughly $80 billion a year to the deficit at the time the Baby Boom retirement really gets in gear [2014-2023].

And don't believe the hype, repeal of the estate tax benefits only .5% [that's one half of one percent] of estates--very few of which are family businesses or farms. Estimates have also shown that repeal of the estate tax will cause significant reductions in charitable giving.

Second, there is every reason to believe that further tax cuts will be sought. Grover Norquist, an anti-tax advocate who works closely with Bush aides, predicts: “You’ll have a tax cut each year. I state it that way in all of the (White House) meetings, and I never get an argument.”







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