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Tax cut may force return to borrow-and-spend

Posted: Friday, February 16, 2001

The following editorial appeared in today's Washington Post:

To help make room for the president's proposed tax cut, the Bush administration proposes to put an unrealistically tight cap on the third of the budget subject to the annual appropriations process. The administration is right to try to impose greater discipline, but the cap it is contemplating would be much tighter than it appears (and) would take the country back to borrow-and-spend.

The administration is still working out its budget. But the goal seems to be to keep the increase in total appropriations to more or less the inflation rate. That sounds reasonable but in fact is quite restrictive, ... Here's why. Defense makes up half the appropriations total. The parties appear to agree that in the next few years defense appropriations will need to be increased significantly in real terms, meaning beyond inflation, just to maintain existing capability. The Congressional Budget Office has suggested that such an increase might have to be in the neighborhood of 10 percent. If appropriations are capped and half the total goes sharply up, the other half the entire domestic budget save for the large entitlements such as Social Security and Medicare has to come just as sharply down. ...

Both parties want to increase education spending. It's unlikely they'll cut transportation spending, nor probably should they, given the need. The housing programs for the poor are likewise stretched; they reach only about a third of those eligible. The record richly suggests that neither party will cut veterans' spending. Just those four categories - education, transportation, housing and veterans - represent perhaps 40 percent of domestic appropriations. Much of the rest is money for basic government operations... From where, not just in the easy first year but over time, are the cuts going to come? They're not, is the rational answer.

Both parties have in the past pledged to conform to such caps, and then have failed to do so. The failures and the efforts of the parties to exchange the blame have become almost annual events. The problem is less the porkiness that congressional critics love to cite than the math. The caps on appropriations are alluring in the abstract. They lose their appeal when applied to particular programs. ...

We have a list of programs we would cut. It is as unlikely as any other. Farm subsidies are billions of dollars a year too high, the veterans' health care system is vastly overbuilt and the mortgage interest deduction ought to be limited; too much of it now is a housing subsidy for the rich. The country could save a lot of money in those areas, though still not enough, realistically, to afford a tax cut of the size the president proposes. Such a cut would, in the end, put an unacceptable squeeze not just on appropriations but on shaky Social Security and Medicare. A modest tax cut might in fact impose some useful budget discipline. A large cut would do serious harm.



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