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Deficit Dance

By Isaac Shapiro
Tuesday, January 11, 2005; Page A15

When it comes to domestic policy, President Bush is dancing an unusual Texas two-step. The exceptional feature of this dance is the long delay between the first and second steps. And watch out: Lots of toes are about to be stepped on (along with lots of government programs essential to Americans' well-being).

The first step was to enact, in a series of bills adopted from 2001 through 2004, extremely large tax cuts. This year alone those tax cuts will total $215 billion. High-income households will reap most of the gains, with the top 20 percent of earners receiving 70 percent of the tax cuts. Roughly $47 billion of the cuts will go to the top 1 percent, a group with average incomes of about $1 million.

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These tax cuts were not paid for. Their costs simply were added to the national debt. Largely as a consequence, the deficit remains quite substantial several years into a recovery. Concern about the debt and deficit is mounting.

Now comes step two. The administration is saying that it is concerned about the budget deficit and that the rising cost of federal programs is the culprit. Expenditures for federal programs are blamed even though federal spending, measured as a share of the economy, is slightly below the average of recent decades, while federal revenue as a share of the economy has plunged to its lowest level in 45 years.

The administration says it is considering a freeze in domestic discretionary spending. If maintained over a number of years, such a freeze would necessitate substantial reductions in services dear to most of us -- the services delivered through federal funding for education, child care, environmental protection, veterans' health care, housing and other programs. The administration also may propose to alter significantly the Medicaid program -- which provides health insurance for low-income children, parents, and elderly and disabled people -- in a way that would ultimately result in dramatic erosion of the health care coverage or benefits this program provides.

With its long pause between steps one and two, the administration has attempted to obscure a key reality: In the absence of the tax cuts, the deficit would be much smaller and the need for cuts in domestic programs much less. The administration is using the deficit as the rationale for its forthcoming effort to cut domestic programs. It seeks to shield from view the fact that the cost of its tax cuts far exceeds the size of the domestic spending cuts it may propose.

Had the administration wanted to be upfront about its proposals, it would have made these trade-offs explicit. The tax cut proposals it advanced, especially in 2003 and 2004 after the recession had ended, would have been accompanied by the program reductions it is expected to seek. That would have made it possible to have a direct vote on this trade-off.

Rather than following that course, the administration took the easy way out. It gladly took step one, pushing for unpaid-for tax cuts. After all, step one is the fun part of the dance. But it conveniently hid the less pleasant second step: paying for those tax cuts with program reductions.

Congress has been the willing partner in this dance. It, too, has sought to obscure the connection between the tax cuts and program reductions, a strategy it is expected to follow this year as well.

Beware the Texas two-step. It represents deceptive budgeting. The trade-offs between tax cuts conferring lavish benefits on the most-well-off and reductions in programs upon which millions of Americans rely should be made clear. The public should be allowed to assess directly whether it wants the government to shrink programs related to health care, child care and protecting the environment so that millionaires can continue receiving tax cuts that cost tens of billions of dollars a year.

The writer is associate director of the Center on Budget and Policy Priorities.


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