From the heart of the business establishment comes a statement criticizing and rejecting the Bush tax cuts -- a stunning repudiation of the president's fundamental economic strategy delivered by the very corporate leaders who make the investment decisions on which recovery and growth turn.
Along with the criticism of the administration plan leveled last month by Federal Reserve Board Chairman Alan Greenspan, the report being issued today by the Committee for Economic Development, a blue-ribbon organization of corporate CEOs and civic leaders, is a warning that President Bush's policies risk long-term damage to Americans' prosperity and the government's fiscal stability.
While administration officials defend the deficits in store for this year and next as small by historical standards and temporary, the committee says that more realistic calculations show that over the next decade we can expect "annual deficits of $300-$400 billion, increasing as far as the eye can see."
Those estimates do not take into account the new tax cuts proposed by Bush in January and now beginning to make their way through the House of Representatives. "All told, the new budget proposals, if enacted, would raise the 10-year deficit by about $2.7 trillion and annual deficits 10 years from now by about $500 billion," the report says. And none of this, by the way, factors in the costs of a possible war with Iraq and its aftermath.
Deficits of this scale, over that many years, would spell economic peril at any time, the business executives say, because they reduce the pool of national savings, diminish needed investments and make us more dependent on foreign creditors.
But they are particularly dangerous at this moment, because in only five years, starting in 2008, the vanguard of the baby boomers will reach early retirement age and the demands on Social Security, Medicare and private health and retirement systems will rise dramatically.
The workforce is likely to grow barely at all in subsequent decades, thanks to continuing low birthrates, which means that overall economic growth will be limited. Meanwhile, lengthening life expectancy and the sheer number of boomers will cause retirement and health care costs to explode.
"Staying on our present track, spending for Social Security, Medicare and Medicaid skyrockets, while revenues fail to keep pace. The federal government deficit would balloon," weakening an already poor savings rate, and "by the 2020s, per-capita income growth would have fallen by more than half, and by 2040 the model predicts growth rates very nearly zero. . . . Perhaps for the first time in this country's history, most Americans could no longer expect their children and grandchildren to have higher living standards than their own."
The hardheaded executives dismiss as unrealistic any hope that the United States can simply "grow its way out of" the interlinked challenges of dangerous deficits and rising demands from its aging population.
Given the scale of the challenge, no single fix -- whether on the spending or revenue side -- will be sufficient. The policy recommendations embrace reform of Social Security and Medicare, careful scrutiny of Pentagon and homeland defense priorities and provision for expanded investment in education, research and infrastructure -- the building blocks of future growth.
But the main point of the report is that "we must begin immediately in the 2004 budget to deal with the explosion of the long-term deficit."
That does not mean raising taxes or cutting spending now, while the economy is still struggling. But it does mean the government should not adopt "any short-term stimulus program that is not combined with a plan to restore longer-term budget balance. We are specifically concerned that the Jobs and Growth Package proposed by the administration, which would raise the cumulative 2004-2013 deficit by about $920 billion (including interest) and raise the annual deficit 10 years from now by about $100 billion, does not meet this test."
Over the decades ahead, considering the demands of an aging population, the threat of terrorism and the growing international obligations of the United States, the Committee for Economic Development says it is "extremely unlikely that the long-term budget problem can be solved without additional revenues. We therefore urge the administration and Congress to forgo at this time any additional tax reductions," including any move to make permanent the tax cuts passed in the make-believe atmosphere of projected budget surpluses in 2001.
It is a sobering message and, considering the source, not one to be ignored.