Thursday, February 10, 2005

Broken Windows
Broken Windows

Thursday, February 10, 2005; Page A22

THE "NEWS" that the Medicare prescription drug benefit will cost hundreds of billions more than advertised -- $1.2 trillion over the next 10 years, or a mere $724 billion once various offsets are taken into account -- should come as no surprise to anyone who paid the slightest attention to the contortions the administration engaged in to cram the benefit into a (supposedly) $400 billion package. It was always clear that, even if the original estimate was correct (and the administration successfully suppressed its own, bigger assessment of $534 billion), it was achieved only because the benefit would not really be in place for the first few years of the 10-year budget window. Anyone who looked at the matter knew that, whatever the precise number, the cost was on a path to explode in the second 10 years and beyond. Those who profess sticker shock now -- and some of them are the same people who had demanded that the benefit be more generous -- have only themselves to blame.

But the phony, or at the very least unwarranted, outrage over Medicare costs underscores a real outrage: the continuing, repeated brazenness of the Bush adminis- tration and its congressional enablers in manipulating budget windows to their liking. Time and again, the administration narrows the budget window to a small crack (five years, for example) when that suits its purpose, and opens it wide (to an infinite horizon) when a longer view bolsters its case. Both by phasing in costs and setting artificial expiration dates for proposals it fully intends to make permanent, the administration minimizes the true price of its plans.

The budget released Monday and the Social Security plan unveiled last week offer the most recent examples of the administration's bad budget practices. A few years back, the administration stopped making 10-year budget projections -- too uncertain, it insisted -- and instead limited the look ahead to five years. This truncated time frame, it turns out, is convenient as the administration tries to prove its fiscal bona fides by asserting that it will cut the deficit in half by 2009. (Of course, the administration manages to achieve that false target only by having inflated its past deficit estimates and by excluding foreseeable costs such as continued military operations in Iraq, but that's a different sort of budget gimmickry.) What happens after that? The administration pretends the alleged downward trajectory will continue, but more responsible estimates show a different picture.

The Social Security discussion offers a double dose of budgetary dishonesty. To inflate the size of the Social Security "crisis," the administration departs from the traditional long-term horizon of 75 years (under which the program faces a $3.7 trillion shortfall) to an infinite timeline under which that number is bumped up to $11.4 trillion. A decade ahead, it seems, is too iffy, but Buzz Lightyear accounting (to infinity and beyond) is fine. When it comes to the cost of its private accounts, however, the administration is, literally, more shortsighted. It says the transition cost of the accounts would be $754 billion over the next 10 years. But because the accounts don't begin until 2009 and aren't fully phased in until 2011 -- conveniently, after the deficit will supposedly be cut in half -- that number is misleadingly low. In fact, according to outside estimates, the transition cost of the accounts would be $1 trillion during the first decade they were in effect and $3.5 trillion during the second decade.

Forecasting the cost of government programs and the trajectory of the deficit is always inexact, but coming up with the most honest assessment possible is a necessary ingredient of responsible policymaking. The administration's preferred approach, however, is the very definition of window dressing: "A means of improving appearances or creating a falsely favorable impression."