I’m sad to see Senator Kent Conrad endorses fiscal irresponsibility:
Senate Democrats unveiled a spending blueprint yesterday that envisions a massive expansion of the nation’s health-insurance program for children, as well as billions of additional dollars for other domestic priorities such as public education, veterans’ health care and local police. Despite the additional spending, Sen. Kent Conrad (D-N.D.), chairman of the Senate Budget Committee, said the proposal would virtually erase the federal deficit within four years without raising taxes and produce a surplus of $132 billion by 2012. Under that scenario, Conrad said, Congress could extend President Bush’s signature tax cuts past their 2010 expiration date and halt the expansion of the alternative minimum tax, but only if sufficient revenue is raised elsewhere to cover the cost of about $800 billion over five years. “We believe some of the tax cuts will be extended. Perhaps all of them will be,” Conrad said during a late-afternoon briefing for reporters at his Capitol Hill office. “You can extend any or all of them, if you pay for them.” Conrad was vague on the details of how that might be accomplished. Possible sources for the extra cash, he said, include improving taxpayer compliance, eliminating offshore tax havens and conducting a top-to-bottom overhaul of the tax system. The briefing yesterday, billed as a preview of a budget document that is to be released today to the Senate Budget Committee, marks the beginning of a months-long attempt by the new Democratic majority to craft an alternative to Bush’s spending plan for the budget year that begins in October. It also marks another step to restore discipline to the congressional budget process, which has faltered badly over the past decade.
While the Senator wants to restore fiscal discipline, he pretends we can extend these tax “cuts” (read deferrals) and have more government spending. How is that possible? The answer may lie in who wrote this WaPo article – Lori Montgomery. I suspect the Senator is talking about the unified surplus (deficit) which includes the increasing Social Security surplus. Of course, Lori Montgomery might ask “what Social Security surplus”? But I would like to see the Senator’s proposal scored in terms of the General Fund DEFICIT. Our friend Dean Baker would want us to cast these figures in terms of percent of GDP.
Update: My thanks to AB reader CoRev for letting us know that the Skeptical Optimist is still doing his silly trend line forecasts:
Balanced budget trend: still June 2008 … one of the quickest ways to slow down or halt the growth of tax receipts would be the prospect of a tax rate hike.
Assuming nominal tax revenues and nominal spending continue to grow at the rates indicated by his trend lines, then the Social Security surplus will match the deficit in the rest of the Federal budget. Of course, there is no reason to believe the assumption that nominal tax revenues and nominal spending continue to grow at the rates indicated by his trend lines. After all, the temperatures in LA today will be about 10 degrees cooler than yesterday. If this trend continues, I’ll have to go buy a heavy winter coat for the weekend.
And of course, Skeptical Optimist is about as dumb as Lawrence Kudlow when it comes to the effect of tax rates on economic growth.