Driven by the cost of hurricane relief, the federal budget deficit is expected to balloon back above $400 billion for the fiscal year that ends in September, reversing the improvements of 2005, a White House official told reporters yesterday. But some budget analysts cautioned that the estimate should be considered more of a political mark to inform the coming budget debate than an economic forecast. This is the third straight year in which the White House has summoned reporters well ahead of the official budget release to project a higher-than-anticipated deficit. In the past two years, when final deficit figures have come in at record or near-record levels, White House officials have boasted that they had made progress, since the final numbers were below estimates.”This administration has a history of overestimating the deficit early in the year, lowering expectations, then taking credit when it comes in below forecast,” said Stanley E. Collender, a federal budget expert at Financial Dynamics Business Communications. “It’s not just a history. It’s almost an obsession.”
So is the White House saying spending is both up and down at the same time? Rather than focus on the fact that they tend to talk out of both sides of their mouths, let’s check the record:
After four years of budget surpluses, the government fell back into a deficit in fiscal 2002, after which the deficit climbed to $378 billion in 2003 and $412 billion in 2004. In 2005, the tide of red ink receded to $319 billion.
My only complaint with this article from Jonathan Weisman is that he did not include the General Fund deficit numbers, but we get the idea anyway. This Administration is clearly running large deficits with no clue what to do about it – except more spin such as this:
Still, Joel David Kaplan, the deputy director of the White House budget office, lamented the rising tide of red ink, ascribing it to necessary spending in the hurricane-ravaged Gulf Coast. “We have made substantial investments in the region and the new deficit projections will include costs of Katrina and Rita recovery,” he said. “We believe that those increased outlays associated with Katrina recovery efforts are a temporary event.”Kaplan joined top Bush administration officials who in recent days have warned that the president’s budget for fiscal 2007, due out next month, will call for significant belt-tightening.
Weisman follows this spin with the following reality:
A projected deficit back above $400 billion is in line with private-sector forecasts, which ascribe the reversal not only to hurricane spending, but to an emergency war-funding request due out soon that could approach $100 billion.
Kash’s point was simple – small spending reductions will not eliminate this enormous budget deficit. Of course, this White House has yet to even figure out how not to increase spending. So the only question regarding taxes is not whether they will go up but when. Well – maybe one other question – whose taxes will be increased in the future.
Update: Lawrence Kudlow has almost solved the Federal deficit problem without tax increases:
Last year, about $27 billion in earmarks made it into appropriations bills, while another roughly $25 billion in earmarks was attached to the highway transportation bill alone. But pork can be found everywhere. There are a couple hundred billion dollars in farm and corporate-welfare subsidies that can easily be scrapped.
So let me get out my calculator. Assuming Larry has the numbers right – there is $250 billion a year in pork that can be eliminated from Federal spending. But as I peruse the Federal budget statistics, I can’t find Larry’s numbers. What am I missing?
Finally, Larry has something from Michael Darda that Kash might be interested in:
But Wall Street economist Michael Darda reports that federal spending increased 8.1 percent during the last twelve months. Since 2001, the budget has expanded 6.6 percent per year compared with only 3.1 percent growth during the 1993-2000 Clinton years. Though supply-side revenues reduced last year’s budget deficit by about $100 billion – moving it down toward $300 billion, or roughly 2.5 percent of GDP – a return to a $400 billion deficit in 2006 as suggested by the White House will be political poison for tax-cut extensions.
Yes, the National Review pundits think the Laffer curve is working and that the deficit is attributable to some explosion in Federal spending.