We in Washington develop our own languages, including "budget-speak." It is the specialized vocabulary that politicians and the press use to discuss the budget. Its purpose is to conduct a vigorous budget debate, with each side trying to embarrass the other, without ever confronting the truly important budget issues. The idea is to give the appearance of an honest debate without the reality of an honest debate -- which might offend many voters. This process is now well underway.
To its critics, President Bush's proposed 2004 budget is a monstrosity. They have a point. Bush's policy is: Cut taxes and raise spending. It wasn't enough to fulfill his campaign promise to cut individual tax rates. Now he wants more tax cuts: elimination of the double taxation of corporate dividends; a radical overhaul of tax-free savings accounts. If these new tax cuts are good ideas, Bush might justify them by proposing offsetting spending reductions. Perish the thought.
Instead, Bush endorses a new Medicare drug benefit with 10-year costs estimated at $400 billion. If enacted, it would probably cover about 25 percent of the elderly's drug expenses, says Marilyn Moon of the Urban Institute. Permanent costs are underestimated, because once Congress enacted the program, there would be pressures to expand it. Bush also proposes, among other things, new grants for the unemployed. The two-year cost: $3.6 billion. Even outside defense and homeland security, he's no penny pincher.
The sloppiness of Bush's budget makes all his long-term projections suspect. The administration didn't publish long-term tax losses for its overhaul of savings accounts. Also omitted is the cost of changing the "alternative minimum tax," which -- if unaltered -- would increase taxes for millions of families. Of course, there's no allowance for a war in Iraq.
Can we then trust the Democrats? Not exactly. Their true policy is: Raise spending and ultimately raise taxes -- a lot. Democratic proposals for a Medicare drug benefit have been about twice as expensive as Bush's, up to about $800 billion over a decade; and they too cover only part of the elderly's costs. On health, education and child care, Democrats would generally outspend Bush.
Between Bush and his critics, there is a shared lack of candor made possible by budget-speak. Its hallmark is to divert all budget debate into a discussion of surpluses and deficits. This distracts from what ought to be the central issues. How much should government spend? For what? Do we now get our money's worth? And -- most important -- how can we prepare for the crushing costs of the baby boom's retirement?
It's this last question that both Republicans and Democrats truly wish to avoid. The Congressional Budget Office projects that from 2000 to 2030, the costs of Social Security, Medicare and Medicaid will rise from 7.6 percent of gross domestic product (GDP) -- our national income -- to 13.9 percent. That's before any Medicare drug benefit. The increase in retirement costs equals (as a share of GDP) roughly four times the present interest costs on the federal debt or almost a third of all federal taxes even before the Bush tax cuts. In today's dollars, covering these costs would require tax increases exceeding $600 billion annually.
Given the baby boom's aging, government spending and taxes will rise. But how much? How much will we burden tomorrow's workers -- today's children and young adults? We ought to lighten the burden by slowly increasing eligibility ages for retirement programs, trimming benefits for well-to-do recipients and eliminating some of today's ineffective, or unneeded, government programs. Food would be amply produced without federal farm subsidies. Small businesses would flourish without the Small Business Administration. People could travel without Amtrak.
We aren't talking about doing these things. Even talk would infuriate many voters. The benefits of making cuts would lie years in the future. Pragmatic politicians, with a strong survival instinct, refuse to play this game. Instead they debate the alleged ills of budget deficits. This debate must be inconclusive, because both sides are correct.
Bush's critics are correct that his budgets worsen deficits and the federal debt, which is the total of past deficits. Under Bush's budget, the publicly held federal debt would rise to $5 trillion in 2008 from $3.5 trillion in 2002.
But the administration's rejoinder is also correct: (a) the high deficits partly reflect the weak economy; (b) deficits now aid an ailing economy (most Democrats agree); (c) deficits haven't noticeably raised interest rates. The interest rate on a 10-year Treasury bond is now about 4 percent, the lowest since 1963. Deficits' effects on interest rates are usually overwhelmed by other influences: inflation, the state of the economy, the demand for credit.
Nor is the debt yet unmanageable. Yes, $5 trillion is a lot of money. But by 2008, U.S. GDP is projected to be $13.8 trillion. Debt would be 36 percent of GDP. This is equivalent to a family with a $100,000 income having a $36,000 debt. After World War II, federal debt was 109 percent of GDP. The rising debt worsens the problem of rising retirement spending, which would be bad even without debt.
The budget debate promises much invective and little insight. One side may gain some political advantage, but public confusion is the most likely outcome. People will be baffled by big budget numbers and complex economic theories. Lost in the rhetoric will be the fact that both Republicans and Democrats are ignoring future retirement costs. The charade is bipartisan and succeeds it if disguises that truth.