Newspaper article The Christian Science Monitor

How Politics Helps Pump Budget-Deficit Balloon

Newspaper article The Christian Science Monitor

How Politics Helps Pump Budget-Deficit Balloon

Article excerpt

Just plain weird! That describes America's tax and budget situation. Among the oddities:

* Under the Republicans, by tradition fiscally conservative, federal spending in the past two years has surged at more than double the rate averaged under President Clinton, a Democrat.

* The nation's at war, spending more than $4 billion a month in Iraq and Afghanistan. Yet both parties are pushing for more tax cuts.

* Politicians of all stripes claim the burden on taxpayers is too high. But the federal tax bill last year fell to 16.5 percent of the nation's gross domestic product (GDP). That's the lowest since 1947.

What's going on? Washington is blithely ignoring the fact that tax cuts that produce deficits have to be paid for in the future. And because today's huge federal budget deficits are "structural," and not primarily related to the business cycle, and because the baby-boom generation is about to retire, reduction of those deficits is becoming ever more urgent.

"Someone, somewhere, at some time will have to pay for them," notes a study released Wednesday by the nonpartisan Center on Budget and Policy Priorities (CBPP) and the Tax Policy Center (TPC).

Worse, the biggest bill will eventually fall on the bottom three- quarters of American households, the study finds. They will lose out on a net basis from the tax cuts, because federal spending reductions or some form of future tax hikes will more than eat up benefits from President Bush's tax cuts. Meanwhile, millionaires will gain an average of nearly $135,000 per year.

Such a rich-poor contrast would normally be a highlight of a Democratic presidential campaign. And in fact, the presumptive Democratic nominee, Sen. John Kerry, proposes repealing Bush tax cuts for households with incomes greater than $200,000. But combining that with Senator Kerry's other tax proposals would still mean a reduction in federal revenues by at least $440 billion over 10 years, the TPC reckons.

"That's what passes for fiscal responsibility these days," says Bob McIntyre, head of liberal-leaning Citizens for Tax Justice (CTJ) in Washington. "Kerry's saying, 'Vote for me. I'm only half as bad as the other guy.' "

Over the past three years, President Bush has signed into law tax cuts totaling more than $1.7 trillion over 10 years. His fiscal 2005 budget proposed additional cuts of $1.1 trillion through 2014.

The cuts make political sense because they help voters, at least in the short run. The average family of four paid 5.3 percent of its income in federal income tax last year. That's nearly half the 10.3 percent it paid in the 1980s.

Then there's the issue of fairness. Bush has succeeded in knocking down personal taxes on investment income to 9.6 percent. That compares with an average 23.4 percent tax rate on wages and other earnings, if Social Security and Medicare taxes are included. …

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