The Bush Budget: Deficits Aren't The Problem
President Bush has sent to Congress his Budget for fiscal 2004 (starting in October), calling for $2.23 trillion in expenditures and a deficit of $304 billion, compared to $159 billion of red ink last year and a surplus of $127 billion in 2001. For the President's Budget Director, Mitch Daniels, this deficit is "acceptable," because it amounts to only 2.7 percent of our gross domestic product, less than half as much as the record peacetime deficits of the mid 1980s. The Senate Minority Leader, Democrat Tom Daschle of South Dakota, replies that the new budget is "fiscally irresponsible."
Daniels is right. A current deficit of $304 billion is reasonable in a stagnating $10-trillion economy like ours, which needs more spending pumped into it from any source. If private consumption and investment are marking time, as they are, only government can do the job.
Since Bill Clinton excluded what he called "the left" from his administration in the 1990s, Democrats, in one of the great role reversals of American political history, have become the party of balanced budgets and debt reduction.
Now it's Democrats who proclaim that budget deficits drive up interest rates and "crowd out" private investment. There certainly are times when this can happen-when an economy is operating at or near full employment, with no reserves of labor and industrial capacity to spare, but not during recessions like the one from which we have yet to emerge. In some periods when federal deficits swelled, interest rates even declined, as during the 1980s.
It's also the Democrats who warn that deficits, which increase our national debt, will leave future generations with a great "burden" and make it impossible to "save" Social Security. Nonsense. The future burden of our national debt is practically zero: any real costs are borne by those of us who live during years when deficits occur, because they allow the government, by spending more money, to shift resources from private to public uses.
But if deficits pay for the likes of education and health, rail and mass transit, national parks and forests, and environmental protection, future generations will be better off, not worse: public investments like these are more productive, and more desirable, than a ton of private investment-remember the telecom-internet boom of the 1990s?
Current deficits. especially when unemployment is high and business investment lagging, are fiscally sound, and they shift no debt burden nor any tax burdens to future generations. In 2013 or 2023, we will deal with the economic and social problems facing us with the resources at our disposal at that time-the labor and capital needed to produce food or medical care or automobiles or, as some may prefer, weapons of mass destruction.
Thus, the Bush deficits are not "fiscally irresponsible." Calling them that allows Democrats and Republicans to carry on a reactionary debate between debt cutters and tax cutters, and to dodge the real issue-that the President's budget is a social and political atrocity.
Big spending increases go to the military and "homeland security," but little new money, or less, to anything else. Education, Housing and Urban Development, the Environmental Protection Agency, and Transportation receive increases of 1 percent or less, not enough to keep up with inflation. Actual cutbacks are imposed upon Amtrak, International Assistance, Medicaid, grants for municipalities to hire more police officers and administer juvenile justice programs, among many other items.
Are state and local governments facing the worst fiscal squeeze in 40 years? Let 'em eat cake-if they can afford it; they'll get no help from George W. Bush. The President ballyhooes his compassionate new spending to fight AIDS and HIV in Africa and the Caribbean-but his budget reduces, by the same amount, the funding that aides said would be sought for a separate development-aid initiative for poor nations.
Totally eliminated is U.S. funding for a 1994 energy deal the Clinton administration negotiated with North Korea, a move likely to heighten tensions when Pyongyang may be resuming production of nuclear-weapons material in the face of an external threat-preemptive attack by the United States.
By contrast, the Pentagon gets $380 billion, an increase of 4.2 percent on top of last year's whopping $36 billion increase, the biggest since the administration of Ronald Reagan, and a mere way station on the road to $484 billion by 2009-excluding costs of any war on Iraq (estimated at $50 and $200 billion, more in the case of extended occupation and rebuilding). This is half the true measure of Mr. Bush's budget; the matching half is the first round of fat tax cuts for the super-rich.
A $304 billion deficit would be exceedingly small if it were spent on social and economic reform-starting with a national health insurance program to cover everyone from birth to death. The best way to pay for something like that would be by reducing U.S. military spending-which would also be the greatest single step we could take toward assuring peace and security for all the world's people, including ourselves.