http://apnews1.iwon.com/article/20030116/D7OJAUD80.html White House Sees Bleaker Deficit Outlook Jan 16, 8:10 AM (ET) By ALAN FRAM WASHINGTON (AP) - White House acknowledgment that deficits for the next two years probably will leap to the $200 billion to $300 billion range show that President Bush's fiscal policies are not working, congressional Democrats say. Democrats leveled their criticism shortly after Mitchell Daniels, Bush's budget director, said Bush would project shortfalls at those levels in the 2004 budget he sends Congress on Feb. 3. Daniels declined to say when the White House thinks surpluses will return, and referred to shortfalls "for the foreseeable future." It was a sharp turnabout from July, when the administration projected a $109 billion deficit this year that could fade into a surplus by 2005. Daniels' somber outlook, which would put deficits near record levels, further roiled this year's budget fight between Bush and congressional Democrats. Republicans say the president's $674 billion, 10-year tax-cutting proposal would rejuvenate the economy and help shrink deficits, while Democrats say it would do just the opposite and make a bad budget situation worse. Daniels used no specific figures. He said only that deficits will be 2 percent to 3 percent the size of the economy, which is estimated at $10.5 trillion. At such levels, deficits are "modest" and "manageable," he said in remarks to the U.S. Chamber of Commerce and later to journalists. "It's important to keep our heads about this," he said. But Democrats chastised Daniels. They said now is when the government should be running surpluses to help buttress Social Security and Medicare for the retirement of baby boomers in less than a decade. "They can't deny it any longer, they can't forecast deficits away without ignoring plain arithmetic. They now have to dismiss the importance of deficits," said Rep. John Spratt of South Carolina, top Democrat on the House Budget Committee. Democrats and many private forecasters said the administration forecasts last summer were too optimistic. Last week, the investment bank Goldman Sachs said it believed this year's deficit would hit $300 billion and soar to $375 billion in 2004. Asked what Bush's budget would do to control deficits, Daniels said, "It's going to control spending and propose measures that will grow the economy, which is the only way back to surplus." One Republican familiar with White House budget deliberations said he expected the White House's deficit projections to hit about $200 billion this year and about $250 billion next year, excluding costs of a possible war with Iraq. Deficits of the size discussed by Daniels would approach the record $290 billion shortfall set in 1992 under the first President Bush. But compared with the size of the economy, which many analysts consider the best way to measure the country's ability to afford deficits, the shortfalls peaked at 6 percent in 1983 and remained in the 4 percent and 5 percent range for much of the 1980s and 1990s. "By historical perspectives, they are modest, they are manageable at this level," Daniels said. "Our common goal ought to be to contain them." But Democrats said the White House was merely trying to contain the political damage of a budget spinning out of control. Just a decade ago, several noted, many in the GOP were adamant about controlling the era's rising deficits. "It's amazing how their story has changed, and their justification for plunging the nation back into deficits has changed," said Sen. Kent Conrad of North Dakota, lead Democrat on the Senate Budget Committee. Daniels said controlling the budget is important but not as a high a priority as protecting national security and strengthening the economy. He blamed the worsened fiscal picture on a continued collapse of federal revenue collections, reflecting the weak economy and financial markets, as well as on the costs of battling terrorism. Democrats say the $1.35 trillion, 10-year tax cut enacted in 2001 has also driven up the shortfalls. Daniels noted that his deficit projections exclude the price tag of any war with Iraq. He has estimated such costs at perhaps $50 billion to $60 billion, while former White House economic adviser Lawrence Lindsey estimated $100 billion to $200 billion.
White House acknowledgment that deficits for the next two years probably will leap to the $200 billion to $300 billion range The solution to this is ... more tax cuts!! Let's keep cutting taxes until everything is good in the world.
Somehow, over 6 years we actually made some real progress in fixing our budget issues ('94-'00) and in 2 years, Bush has completely destroyed that. The fact that even the longer-term projections show this problem -- and the long-term tends to assume positive growth -- indicates that these deficits won't be paid back when the economy gets going. The next generation will be thrilled to know that they'll get to pay an even larger chunk of their taxes simply to paying interest on debt racked up by their parents.
Put simply, the budget deficit/surplus is 95% the result of the current economic situation and 5% the result of any administration's policies. With rising wages and a rising stock market, tax receipts skyrocket. Surpluses arise. What Bush is doing is attempting to stimulate the economy so this will take place. The worst policy one can have in an economic downturn (though I still maintain that we are emerging from it) is the policy of taking money out of the efficient private sector and injecting it into the ineffecient government. I have a classic post on this topic that I will find and post.
History has shown that lower taxes can increase tax revenue, hasn't it? Bush did all that? REALLY? I didn't realize it was that simple.
Bush is doing the same thing to the country that he did to Texas. Anyone notice that we're projected to have a deficit of over 9 BILLION over the next 2 years in Texas? And that we can't "borrow" money to cover it like the Federal Government? Bush used the same "logic" to get a massive tax cut (that I certainly didn't see, but his contributers certainly did) in Texas so he could use it to run for president. We're paying for it now. Isn't life grand?
Assuming that the US economy is in recovery (albeit slowly), shouldn't the budget deficit be going away? Hasn't the argument been that deficits are ok during recessions since they are offset by surpluses in economic booms? Given that we are between the peak and valley of the economic cycle, shouldn't we be flush now?
Do you people truly believe that the budget problems are due to Bush's actions in his years as president and not due to the economy? Wow. Bush is making a full-fledged attempt at reviving the economy through tax cuts which will stimulate the economy and thereby get the budget back on track. Many people believe the stock market is an efficient judge of proposed policies and their chances of success, and it reacted extremely favorably to Bush's announced plans.
History has shown that lower taxes can increase tax revenue, hasn't it? Absolutely. You're going to have higher net taxes at 90% tax rate than 100% -- because the 100% tax rate will result in $0 in net taxes (since no one will work). On the other hand, you'll have lower taxes at 0% than 10% as well. No one knows what the "ideal" rate is to maximize tax revenues and growth - I doubt there is one, in fact. It most likely is based on current conditions. Bush did all that? REALLY? I didn't realize it was that simple. It really was that simple. Take a surplus; spend more money; cut taxes; cut no spending. That was the Bush Plan in 2001. Government spending is now growing again as a portion of GDP for the first time since the early 90s, I believe. So much for "smaller government". Put simply, the budget deficit/surplus is 95% the result of the current economic situation and 5% the result of any administration's policies. With rising wages and a rising stock market, tax receipts skyrocket. Surpluses arise. Yeah, kind of like the 80's. Oh wait a minute... That's all nice in theory, but the Bush projections don't assume an on-going recession. They account for rising wages and a rising stock market and a growing economy. And they still project deficits for the foreseeable future. That's what happens when you cut $1.5 trillion out of the revenue supply.
Will someone who supports the current administration's economic policies, please -- pretty please -- respond to Deckard's point? I have never seen this addressed, though I have seen it raised a number of times. Don't dance around the point. Please address Bush's tax and fiscal record in Texas. Thanks.
Weren't all of the wonderful budget surplus #'s based upon the 90's amazing economy/tax revenue? The economy is to blame for the budget deficit. Bush has used the military to protect the US, if that means a budget deficit for a few years then I am for it. Tax cuts encourage the economy to grow which increase the tax revenue. There is a point where more tax cuts won't do anything but increase the deficit, I don't think we are at that point though. I personally think that Bush's tax plan is a little to big, but I think that he may be coming out with a HUGE proposal that he knows will get watered down to something much smaller.
This is the sort of dance I was talking about. (sigh). Yes, Davis sucks. Deregulating energy sucked. Now. Please. Address. Texas.
B-bob, can't give you any details as it is depressing to follow the mess in Austin. The Houston Chronicle has been full of recent reports that the current Bush clone who replaced him has vowed no new taxes, but he will make cuts and increased user fees. Deckard has it right. Bush had no accomplishment in TX when he decided to run for president so he frantically had a tax cut for the wealthy so he could claim some accomplishment. Hey UT guys, I guess that means your tuition is going up.
Weren't all of the wonderful budget surplus #'s based upon the 90's amazing economy/tax revenue? The economy is to blame for the budget deficit. No, the economy is not to blame for the deficit. Or, if it is, the White House thinks the economy is going to suck for the foreseeable future: Democrats leveled their criticism shortly after Mitchell Daniels, Bush's budget director, said Bush would project shortfalls at those levels in the 2004 budget he sends Congress on Feb. 3. Daniels declined to say when the White House thinks surpluses will return, and referred to shortfalls "for the foreseeable future." It was a sharp turnabout from July, when the administration projected a $109 billion deficit this year that could fade into a surplus by 2005. If it were simply the economy, and they project the economy to recover this year or next, then they would be projecting surpluses by then.
Did you miss the asterik on those figures? They are subject to change at any point and time. Hell they could have a surplus the next time they run the numbers. These guys need a new calculator or something.
I want to just say that Bush's tax cuts to benefit primarily the wealthy are the most illogical economic stimulus I've ever heard. The idea is that if we put more money back into the hands of the wealthy then they will spend more and get our economy on track. If they are already wealthy, it doesn't matter if they get more wealthy as far as the economy is concerened. They ALREADY have enough to reinvest. If I have thirty five million dollars, I don't need a tax break to invest. I have more than I need, and plenty to invest with. It's not like I'm going to sit on that money not investing it, and all of a sudden breathe a huge sigh of relief because I'll be getting a tax break, then think to myself, ahh now I'll finally have enough to invest. It's ludicrous. I already have enough to invest, and will do so, because investments will bring me more money, whether it's taxed at current rates or lesser ones. Using that same scenario, I also have plenty to spend in the retail economy, housing, you name it, I don't need another break from the govt. to enable me to spend. Conversely if I make around $27,000-$33,000, my income will be mostly budgeted with little freedom to invest all that much, and spend on consumer goods. If I get a big tax break, I will be more likely to invest(again in the hopes of making more) and to spend on consumer goods. Economically it's not wise to weight tax cuts towards the wealthy, and judging from Bush's latest opinions polls, it's not good politically either.
The average family has $8000 debt on their credit cards. A $500 tax rebate may be thrown after old debt and not use to stimulate the economy. This is especially true given the jobless recovery we are experiencing.
True but I wouldn't mind the middle class getting a little more than $500, plus if those tax cuts were long term, it would help pay off those debts sooner so that they would invest in the economy, but I do agree that credit card debt would zap some of the money.
