In the wake of Hurricane Katrina, credible private experts are forecasting a federal budget deficit of $500 billion this fiscal year, a sharp reminder of the fiscal folly of the current government.
For all the deserved criticism the Bush administration has received for its tardy and ragged response to the storm’s ravaging of New Orleans and the Gulf Coast, the long-term costs to the nation of the reckless disregard both the president and Congress have shown toward paying the nation’s bills may be even greater.
In time, those forced from their homes in Louisiana and Mississippi will return and a degree of order will be restored to their communities. Business will recover. Mardi Gras will be celebrated in the French Quarter again. But our children and grandchildren will pay a continuing price for the refusal of our leaders to face the reality of an out-of-control federal budget.
The enormity of the failure is measured by a set of numbers that Rep. John Spratt, the senior Democrat on the House Budget Committee, carries with him. They chart the annual increases passed by Congress in the national debt limit. In 2002, it was $450 billion; in 2003, $984 billion; in 2004, $800 billion. And this year, the House has passed an increase of another $781 billion, on which the Senate has yet to act. That totals a stunning $3 trillion in additional debt in four years – a 50 percent increase in the cumulative debt from all of America’s previous history.
When you look at that record, the self-congratulatory tone of the Republicans who have been running Washington seems absurdly unjustified. In July, when the White House Office of Management and Budget said the deficit would decline to $333 billion this year from $412 billion in 2004, President Bush said, “It’s a sign that our economy is strong, and it’s a sign that our tax relief plan, our pro-growth policies are working.”
In August, when the Congressional Budget Office lowered the deficit forecast to $331 billion, Republican Rep. Jim Nussle of Iowa, chairman of the House Budget Committee, said, “We’re clearly on the right track. The strong economy, higher revenues and falling deficit projections are all results of the successful leadership and policies of the Congress and the president.”
These judgments were faulty at the time. They made no provision for the continuing costs of the war in Iraq or the Republican plan to end the estate tax and make all the previous Bush tax cuts permanent. And, most of all, they did not calculate realistically the costs of the new Medicare prescription drug benefit and the looming obligations to the millions of baby boomers who are nearing retirement age.
Now those pre-Katrina estimates have been rendered even more ridiculous. In the first 10 days since the storm hit, the president asked Congress for emergency appropriations of $62 billion – and the bills are just starting to come in.
The question is whether this will force the president and congressional Republicans to suspend their obsessive drive to reduce the revenue base of the federal government and whether they finally will start paying the bills their government is incurring.
It is hard to be optimistic on that score. This president may not literally be incapable of reversing directions, but we have yet to see him do that on any significant matter.
Treasury Secretary John Snow reportedly told congressional Republicans in a closed meeting that Katrina strengthens the case for making the Bush tax cuts permanent.
Some Republicans in Congress are appalled at the fiscal wreckage, but the leadership on Capitol Hill has yet to assert its constitutional power of the purse or do anything but increase the damage by cutting taxes while simultaneously boosting spending.
The warning signs of impending economic calamity are every bit as evident as were the forecasts of ruin for New Orleans when a major hurricane hit.
The runaway budget deficits are compounded by the persistent and growing imbalance in our trade accounts – jeopardizing the inflow of foreign funds we have used to finance our debt.
At a recent private dinner where many of the men and women who have steered economic and fiscal policy during the past two decades were expressing their alarm about this situation, one speaker summarized the feelings of the group:
“I think it’s 1925,” he said, “and we’re headed for 1929.”
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