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A Question for the Budget Critics

During the great debate over budget and tax policy following the Bush tax cut, and the reappearance of budget deficits, I caught E.J. Dionne on The Diane Rehm Show criticizing the cynical and misleading way Republicans were characterizing the fiscal consequences of their policies — and condemning the tax cuts (and advocating their repeal) as a primary reason for the existence of the deficit. His critiques of Republican hyperbolae were entirely fair; however his own assessment of the “reality” of the fiscal situation was equally hyperbolic. Since honesty in these discussions is something we desperately need and almost never get, I sent this to him as an sincere question about his assumptions and attitudes. He did not respond.

1 June 2003

I caught the tail end of the Diane Rehm show on Friday.  Since you were one of the people critical of the “Bush Tax Cuts”, and since I’ve been wondering about a finer point on that subject for a while, I’d like to ask you a question about them.

According to the CBO, next year’s proposed budget is over $2.2 Trillion, which accounts for about 18% of GDP. The proposed tax cuts are on the order of $350 billion (or $800 billion by more cynical estimates) spread over ten years — or, if they were evenly spread over that time, about $35-$80 billion/year (actually less in the early years — like now — because they are back-end loaded).

That amounts to about 0.3%-0.7% of GDP, so I believe you when you say it’s not likely to stimulate the economy the way the Republicans claim it will. Fair enough. They are exaggerating to get it passed, and their real agenda is political — shrinking the size of government or a cynical election ploy, take your pick.

But that amount also corresponds to about 1.6% to 3.6% of the federal budget (less in the early years), so it also isn’t exactly the budget catastrophe the Democrats would have you believe. It seems a moderate and perfectly reasonable adjustment in a down economy.

They (and you) seem to imply that the several hundred billion dollars of deficit we now face is primarily the result of a less-than $35B cut in revenue due to the tax cuts — rather than the result of at least as much increased spending (about which you will never hear a bad word from the Democratic party). So isn’t that contention at least as cynical and misleading as that of the Republicans?

At this point (alas) I don’t expect ever to hear reality or truth coming from the lips of a politician. But when will we hear any realistic and rational discussion of this stuff from the talking class?

© Copyright 2003, 2005, Augustus P. Lowell

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