January 31, 2006
Tuesday

President Bush likely would prefer not to dwell on the fact, but new congressional estimates show that one of his administration's legacies will be a running federal budget deficit.

The president took office with a budget surplus and a forecast of a cumulative 10-year surplus of $5.6 trillion. That is now, like, so yesterday.

The Congressional Budget Office predicts a deficit of $337 billion when this fiscal year ends Sept. 30. And these same estimates see the deficits dropping to $241 billion in 2009, the last budget-year Bush will be responsible for, and $114 billion by 2011. Using the same assumptions, the Concord Coalition, an independent watchdog group, says the budget could be in balance the year after.

But these assumptions are unrealistically conservative. They assume the president's tax cuts expire; there is no change in the expanding alternative minimum tax; that the costs of Iraq and Katrina have wound down; and that there are no new federal spending initiatives.

And the forecast calls for Congress getting improbably tough on spending. Say the budget scolds at the Coalition: "... it assumes policymakers will hold discretionary programs, including defense, to just 2 percent growth annually - as opposed to 8 percent last year and a 5.2 percent annual average rate from 1994 through 2004 ..."

Barring that, says the CBO, we'll be running $300 billion-plus deficits through the end of the decade, ratcheting up the national debt and the cost of paying interest on it. And, taking into account tax cuts, Iraq and Katrina, the CBO says this year's deficit is likely to reach or exceed $400 billion and the White House agrees. The all-time record one-year deficit was $413 billion in fiscal 2005.

Bush and the GOP Congress have begun talking a tough game on budget deficits, but that will require really hard choices on tax cuts and spending. Both will have to be reduced and in ways that may not be politically popular.

Concludes the CBO, "A substantial reduction in the growth of spending and perhaps a sizable increase in taxes as a share of the economy will be necessary for fiscal stability to be at all likely in the coming decades."

The longer those choices are put off, the tougher they'll be when they absolutely must be made.

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