Fiscal Ruin on the Horizon

washingtonpost.com
Fiscal Ruin on the Horizon

By David S. Broder

Sunday, October 17, 2004; Page B07

It's not true that people in Washington can't agree about anything. Across the policy spectrum, there's a clear recognition that the present path of budget-making is unsustainable -- in fact, ruinous.

The Concord Coalition, whose leadership includes prominent Republicans, says that with realistic assumptions but no change in policy, the federal debt will swell by a staggering $5 trillion in the next 10 years. The liberal Economic Policy Institute says that a "budget train wreck" lies ahead. The nonpartisan Congressional Budget Office warns that it looks as if "substantial reductions in the projected growth of spending or a sizable increase in taxes -- or both -- will probably be necessary" to avoid fiscal disaster.

The agreement extends everywhere except where it is most important -- to the rivals for the White House and to the members of Congress.

President Bush and his opponent, Sen. John F. Kerry, blithely assert that they will cut the budget deficit (a record $413 billion in the current year) in half within four or five years, but they are purposely vague on how they will do it.

Meanwhile, Congress has retreated further and further from any pretense of fiscal responsibility. When they went home to campaign last week, the lawmakers executed what Stan Collender, a prominent budget expert, called a "triple dive." They recessed "having failed to pass the fiscal 2005 budget resolution, all but four of the 13 regular 2005 appropriations and a needed increase in the limit on the national debt," so the Treasury can sell bonds to our creditors.

"This three-part failure," Collender said, "is the best evidence yet that Congress has become either unwilling or unable to deal with the federal budget. It has abrogated its fiscal responsibilities at every step in this year's debate except when the decisions -- like a tax cut -- were politically easy."

Tax cuts they can do. With bipartisan majorities, they passed a $143 billion bonanza for corporations of every sort, shortly after extending what the lawmakers were pleased to call a "middle-class" tax cut of $146 billion. You might be surprised to learn, as I was, where that "middle class" tax relief actually goes.

According to the Center on Budget and Policy Priorities and the Urban Institute-Brookings Institution Tax Policy Center, households in the middle 20 percent of the income scale -- the "middle class" -- receive only 9 percent of the benefits. Their average saving will be $162. Those in households with incomes from $200,000 to $500,00 will be $2,390 better off.

It is important to remember that these latest tax cuts are all being financed with borrowed money -- money that at some point will have to be paid back. That was the point made by Pete Peterson, the former Nixon administration secretary of commerce, in a terrific piece that business reporter Paul Solman did for PBS's "NewsHour With Jim Lehrer" the other night.

Noting that today's deficits will burden future generations, Peterson said, "The ultimate test of a moral society is the kind of world it leaves to its children. And as I think about the concept that we're slipping our own kids and grandkids a check for our free lunch, I say we're failing the moral test."

Morality aside, there's the little matter of piling up even more IOUs instead of the savings that will be needed to finance the retirement and health care costs of the 77 million baby boomers now approaching retirement. That responsibility ought to weigh heavily on everyone running for federal office, but it is hard to find a campaign where it is being discussed with any degree of candor and realism.

It would be nice to pretend that once next month's election is out of the way, the winners will buckle down and address this crisis. But both Collender and Philip Joyce, a George Washington University professor, suggest that the whole budget-making process in Congress may be on the verge of breakdown.

As Joyce put it in an article for a forthcoming scholarly journal, "The failure of the Congress to agree on a budget resolution for three recent fiscal years -- 1999, 2003 and 2005 -- suggests that the budget process may be at a crisis point, and this crisis may be exacerbated by the uncertainty associated with the cost and the duration of the war on terrorism. If a consensus is not reached on a goal for fiscal policy, the budget committees and the budget resolution are in danger of becoming irrelevant."

This would be a dangerous time to lose the best tool for dealing with our fiscal mess.