Welcome back, and what a mess
Published: Saturday, January 4, 2003 at 6:01 a.m.
Last Modified: Saturday, January 4, 2003 at 12:59 a.m.
Governors, Senators, Congressmen, Mayors, Assemblymen, Secretaries, Councilmen, Commissioners, Aldermen and, oh yes, Mr. President:
Welcome back to the office. What a mess.
Government at all levels is in the worst fiscal shape since the 1970s. It is not the balance sheet but the trajectory that is causing economists to hold their breath.
Many state and local governments have run out of money as tax revenues dry up. Education is suffering. State-supported universities are cutting into the bone. And public schools will be next unless Washington steps in and grants relief to states.
President Bush prepares to submit another budget he likely will claim is as balanced as one can get in today's economy and world snake pit. But according to the Concord Coalition, the non-partisan budgetary think tank whose calls for reason have fallen on deaf ears, the annual federal deficit is widening and in 10 years will reach $532 billion.
From 2012 on, costs of Medicare, Social Security and Medicaid - the principal programs for security of the aging - will explode, eating up a greater share of the national wealth every three years than it now takes a decade to consume.
By and large, the political community has found it convenient to ignore these warning signs for the very good reason that fiscal prudence doesn't sell in Peoria. Republican supply-side conservatives want more tax cuts and Democratic big government liberals have spending programs a mile long.
Moderates from both parties seem to want both. Senate Majority Leader Bill Frist's first statement out of the box called for more health outlays on top of the tax cuts his party pushed through. Sen. John Edwards, D-N.C., in announcing his presidential candidacy last week, called for an array of tax cuts for the middle class, home heating and college. Let the bidding begin.
Along with new state and local needs for help, the tide of federal red ink will be swelled by pet projects like ballistic-missile defense, which Bush has now decided to build before we learn how to make it work.
As the country wages war on terrorism and prepares for war against Iraq, a new nuclear menace looms in North Korea. Other presidents have faced this "guns-and-butter" dilemma. Power, military victory and international responsibilities are costly and don't go away when the economy sours.
Yet, even though the United States is far wealthier than it was during earlier crises, an extra hazard lurks. The coming retirement of the great Baby Boom generation has put the country on much thinner fiscal ice.
Budgetary surpluses were being generated by high taxes and a roaring economy as the new millennium dawned. But the latest 10-year projection by the Congressional Budget Office is, instead of a cumulative budget surplus of $5.6 trillion, a cumulative budget deficit of $2.9 trillion.
That assumes that all parts of the 2001 tax cut remain in effect and spending keeps pace with the gross domestic product - both of which are probably conservative assumptions considering the political direction.
Remember the bold plan to use surpluses to pay down the national debt, and thereby make it safe to borrow in later years for the Baby Boomer retirement costs? Gone with the wind. Nobody liked it anyway. It was as joyous as buying a new roof.
Now the roof, she is a-leakin' and the rain is comin' in, in the words of an old song about putting things off.
"America stands at a crossroads," the Concord Coalition warns. "We can demand that our leaders undertake the kinds of reforms, including long-term entitlement reforms, that are needed to put the budget on a sustainable trajectory - and face up to the required sacrifice.
Or we can continue to pretend that our choices have no consequences - and let our children pay the price in lost opportunities, lower living standards, and a less safe and secure place in the world."
Happy New Year.
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