Prometheus 6

Deficit deception
August 3, 2004

PRESIDENT BUSH is using White House budget projections to disguise the reality of dismal fiscal news. This year's deficit will be the largest ever, and his tax cuts are responsible for much of the red ink.

In releasing the figures last week, the Office of Management and Budget said the $445 billion deficit expected for this year is $100 billion less than the projection in February. But many budget watchers at the time said the figure was too high. Even at $445 billion, the figure is $70 billion worse than last year's and represents 3.8 percent of the economy, a huge amount during a time of expansion.

Just 3 1/2 years ago, OMB was projecting a surplus of $387 billion for the 2004 fiscal year, which ends Sept. 30. Perhaps that figure was artificially high, a product of tax revenues flowing from the bubble economy. Bush sold his initial tax cuts as a way to absorb the excess revenue, not as an economic stimulus. With deficits expected far into the future, those cuts need to be reconsidered.

Deep within its latest report, OMB offers a breakdown of the causes of the turnaround from surplus to deficits in 2004. It attributes $216 billion to the Iraq invasion, homeland security, and other unforeseen expenses; $333 billion to revenue losses that had nothing to do with tax cuts, and $290 billion to the tax cuts themselves. Some revenue stimulation was necessary following the 9/11 attacks and the end of the Internet boom, but there was no need for the cuts to remain, producing deficits on this scale.