It’s Your Children’s Money. Quick, Take It!
When it comes to the federal deficit, there are few free lunches. What we don’t pay for today, we and our children will pay for tomorrow, with interest–the birth tax:
When President Bush informed the nation last Sunday night that remaining in Iraq next year will cost another $87 billion, many of those who will actually pay that bill were unable to watch. They had already been put to bed by their parents.
How big is the Bush Birth Tax overall? Roughly $7.9 trillion and counting:
The $5.6 trillion surplus once predicted for the 10 years ending in 2011 is now a $2.3 trillion cumulative deficit under the best-case prediction issued by the Congressional Budget Office two weeks ago.
That’s right, when a child is born in the currrent decade, she starts out $28,000 more in the hole than she would have without the Bush deficits. (Presumably “best case” means “if tax cuts that are scheduled to sunset really do, and if the economy grows very rapidly–the latter is unlikey, and the former is a thousand-to-one longshot).
And it’s not just Republican tax cuts that are to blame, there’s also Republican spending:
The conservative Cato Institute noted tartly last month that Mr. Bush had never vetoed a spending bill, had advocated huge farm and Medicare programs and had presided over double-digit increases in spending each year of his term. Barely a month goes by when House Republican leaders do not propose a new form of tax cut, and Congressional Republicans join the administration in saying they fully intend to extend the tax cuts that are now scheduled to expire in 2005, which would add another $1.6 trillion to the cumulative deficit by 2013.
If taxing and spending is bad, and it often is, not taxing and still spending is worse. At least when spending is financed by tax hikes, there’s a political price to be paid and the dollars have to be justified, so there’s a check built into the process. When the government finances spending with deficits the bill comes due later–after the next election–so there’s much less of a political cost and thus much less restraint.
Another nugget from the Times story, which gives a good summary of how we got to where we are now:
“Once the gridlock was broken, it was hard when staring at the surplus to argue that there shouldn’t be a tax cut,” said Mr. Reischauer, now president of the Urban Institute. “Of course there was debate about who should get what share of it. But because there seemed so much certainty about the persistence of these surpluses, there wasn’t a proper caution that would have led lawmakers to say, `We don’t know what the situation will be in the next downturn, we don’t know the priorities of future Congresses, so we should not have a set of tax cuts that phase in over a 10-year period.'”
I seem to recall one candidate in the 2000 election making the exact argument (underlined) that Mr. Reischauer says lawmakers were not led to make. Here’s a (Hint: Gore’s economic plan called for “[Setting] aside $300 billion of the surplus as a reserve in case rosy projections do not materialize.”)
Bush will surely try to blame his deficits on the economy and the war on terror, but while it’s been a jobless recovery, the economy has not been in a recession as traditionally measured (by GDP growth). GDP growth has been modest, meaning that without tax cuts, tax revenue growth would have been positive. Instead, the government now spends more and collects less. For more numbers, see this post, where I also did a ballpark allocation of responsibility for the deficit and conservatively estimated the Bush administration’s share of that blame at two-thirds.