Bush Mandate = Deficit

[Zarathud]

As a fiscal conservative who voted for Kerry primarily due to disgust with Bush's economic policies, I am certain that the Bush mandate will be interpreted to mean massive budget deficits and a growing national debt. I thought I'd pass on an article from today's Daily Tax Report:

Daily Tax Report - Thursday November 4, 2004

GOP Gains Could End Moderate Effort
To Renew Pay-Go Discipline for Tax Cuts

The net gain of four Republican Senate seats in the Nov. 2 election, bringing the GOP total to 55 seats, may be enough to end the budget gridlock that prevented passage of a final fiscal year 2004 budget resolution and could doom chances of applying the pay-go discipline to tax cuts, two experts said Nov. 3.

"The Republicans increasing their majority in the Senate is quite consequential for budget issues because the four [moderate Senate Republican] holdouts from last year's budget resolution fight can now be outvoted," said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget and deficit watchdog group.

Bixby was referring to Sens. John McCain (R-Ariz.), Lincoln Chafee (R-R.I.), Olympia Snowe (R-Maine), and Susan Collins (R-Maine). The four senators held firm during 2004 by refusing to vote for a final version of the FY 2005 budget resolution unless it included a renewed pay-go provision requiring that all tax cuts to be fully offset to prevent record deficits from rising.

House Republicans opposed applying pay-go rules to tax cuts and Congress never adopted a final version of the budget resolution. The four Republicans who joined with most Senate Democrats to back the pay-go provision that created a year-long budget impasse "are no longer an obstacle to making the [previously passed] tax cuts permanent or to having pay-go only for spending," Bixby said.

Bixby said that, while some current GOP senators such as Sens. Pete Domenici (R-N.M.), Charles Grassley (R-Iowa), George Voinovich (R-Ohio), and Lindsay Graham (R-S.C.), have "deficit hawk genes," he is not sure if any of the newly elected Republican senators would join with the four moderates who back pay-go for tax cuts.

He said prospects for renewing pay-go for tax cuts are now "much less than 50-50" because the House will not go along and President Bush opposes it. For those backing pay-go for tax cuts, such as the Concord Coalition, "the best that you can hope for is another stand-off" next year like the one that bottled up the budget resolution this year.

As a result, Bixby said, "there's a much greater chance that there'll be a budget resolution passed on time" in 2005 unless Republicans over-reach on the use of the reconciliation process to push for additional tax cuts, angering enough fiscal conservatives worried about the impact on the deficit.

Reischauer Agrees Pay-Go Dead
Former Congressional Budget Office Director Robert Reischauer, who headed the agency from 1987 to 1994 when Democrats ran Congress, agreed Nov. 3 that the four Senate GOP moderates have probably lost their clout in the next Congress unless they can expand their group.

Reischauer also said that he is unsure if Republicans, emboldened by their election gains, will use their "post-election euphoria" to move quickly to try to make past tax cuts permanent or if the GOP will "keep the tax powder dry to allow for fundamental reform of the tax code," which President Bush has said would be a priority in his second term.

On the deficit, which totaled a record $413 billion in FY 2004, Reischauer predicted Republicans would make "a concerted effort to hold down discretionary spending" but he also warned of "very little prospects that we will make serious inroads into cutting deficits" until voters start feeling the pain in their pocketbooks in the form of either higher interest rates or higher inflation linked to the red ink.

Reischauer said he sees Republicans splitting into three groups in the 109th Congress: those from safe conservative districts who feel deficits matter and who want to slash spending to reduce them; those from more competitive districts who are less inclined to cut spending as deeply; and those who do not feel the deficit is a big problem and who do not want to sacrifice the GOP's new political advantage.

Bixby said that, even with GOP election gains, "the deficit's still there" and needs to be addressed but he said he doubts that Bush will change course on the budget as he begins a second term.

"I think he's pretty well lashed himself to the mast on this and it's going to take something pretty cataclysmic to get him to change course," Bixby said.

House Budget Committee Chairman Jim Nussle (R-Iowa), ranking member John Spratt (D-S.C.), retiring Senate Budget Committee Chairman Don Nickles (R-Okla.), and ranking member Kent Conrad (D-N.D.) all were unavailable for comment Nov. 3 on the impact of the election on budget and deficit issues.

Where's Ross Perot when you need him? And those lockboxes from the 2000 election? I'm sorry, we busted the safe wide open and spent all of the rainy-day money on Haliburton and strippers before getting disgusted by watching all of the hot man-on-man sex in Massachusetts (because, let's face it, not many people are up in arms about hot lesbian sex as long as we're allowed to watch).

EDIT: Because nobody should misspell hot lesbian sex. Or screw up Tags.

[Little Raven]

Zarathud, Reagan proved that deficits don't matter. Can't you get with the times?

[Eightball]

Well, I voted for Kerry but not because of budgetary issues. Democrats aren't know for their fiscal conservation either...

[Zarathud]

Democrats have been running scared on the deficit issue for almost 20 years now (since 1984). If anything, President Clinton really shifted many Democrats to the center on fiscal conservatism (such as posterboy Sen. Lieberman -- too bad he's such a political putz). The government shutdown in the 1990s was over how FAST to balance the budget, not whether to balance the budget at all.

Sure, the Democrats would LOVE to spend your money...but they're afraid of the political consequences. Now it's the Republicans who have become the largest threat to a balanced budget -- whether for defense spending, irresponsible tax cuts or pork-barrel politics. Bush hasn't vetoed or threatened to veto a single pork barrel project.

Deficits do matter. When the baby boom generation retires and asks for Social Security "trust fund" to be paid back, the Reagan-Bush deficits are going to cause a significant financial crisis. That's what the Ross Perot charts were all about -- one day soon America will have to pay the bill for the last 25+ years of unfunded government.

[noxiousdog]

You do realize that there wasn't really a surplus in the 90's?

[RunningMn9]

You do realize that there wasn't really a surplus in the 90's?

Good luck.

[Zarathud]

Who suggested that there was a surplus in the 90's? Not me.

What happened is that the Social Security "trust fund" (note the quotes, here and in my last post) was plundered to balance the budget. But at least we had balanced budgets and started repaying the deficit gradually as Treasury Bills became due. That's much better than sinking deeper into debt.

The lockbox proposals were a way to set aside the projected surplus in the 2000s. But that concept faded into oblivion after the Florida recount and the election ended. I loathed Al Gore (and his wife, Tipper, for many reasons), but the lockbox idea was sound fiscal policy.

If you want my bona fides, here we go: I've been following the path of fiscal conservatism and the impending Social Security disaster ever since reading an article in USA Today Magazine by Newt Gingrich (back from April/May 1984) during the late summer of 1986. You might remember 1986 as the year the tax code was last revised. From there, I picked up a double major in political/economic theory, spent some time doing economic/tax consulting and then put myself through law school where I specialized in tax law. I now practice in trusts and estates and focus on tax and charitable planning. You might have guessed that last part if you know the Daily Tax Report is a trade journal.

[Little Raven]

Eh, don't take RM's and ND's sniping too seriously...they just get cranky late at night.

[noxiousdog]

My apologies, Z. I've just gotten used to hearing the Bush causes deficits line so often, I automatically add the 'from surpluses' part.

[Kraken]

"I've earned capital in this election - and I'm going to spend it..." I keep thinking yeah, we know that spending is something you do well.

[The Preacher]

The lockbox proposals were a way to set aside the projected surplus in the 2000s.

The projected surpluses were a farce because the economy was unsustainable. The rest is noise.

[gbasden]

The lockbox proposals were a way to set aside the projected surplus in the 2000s.

The projected surpluses were a farce because the economy was unsustainable. The rest is noise.

So, of course, the answer is to create ever larger and larger deficits?

[Dirt]

The answer was, obviously to give tax cuts with one hand and pay for a war with the other.

Right now, it's estimated that the deficit is going to cost each household $25,000. Don't spend your tax cuts too quickly, you're going to have to pay up on that $25,000 in the next 20 years.

[The Preacher]

The lockbox proposals were a way to set aside the projected surplus in the 2000s.

The projected surpluses were a farce because the economy was unsustainable. The rest is noise.

So, of course, the answer is to create ever larger and larger deficits?

I was pointing out the absurdity of you claiming that the election changed the surplus.

[gbasden]

The lockbox proposals were a way to set aside the projected surplus in the 2000s.

The projected surpluses were a farce because the economy was unsustainable. The rest is noise.

So, of course, the answer is to create ever larger and larger deficits?

I was pointing out the absurdity of you claiming that the election changed the surplus.

It is entirely possible that the election of George Bush over Al Gore dramatically changed the amount of deficit we racked up. Obviously we'll never know if Al would have spent as profligately as W, but it's entirely probable that we would not have seen a massive tax cut nor a war in Iraq, both of which have been quite costly.

Since I never claimed we had a surplus in the 90's, it's quite difficult for me to argue about the absurdity of that claim or not.

[The Preacher]

I was pointing out the absurdity of you claiming that the election changed the surplus.

It is entirely possible that the election of George Bush over Al Gore dramatically changed the amount of deficit we racked up. Obviously we'll never know if Al would have spent as profligately as W, but it's entirely probable that we would not have seen a massive tax cut nor a war in Iraq, both of which have been quite costly.

Since I never claimed we had a surplus in the 90's, it's quite difficult for me to argue about the absurdity of that claim or not.

My bad, I lost track of who said what (it was Zarathud). Mes apologies.

Similar to your point, I made no judgment on what the answer was (although I think tax cuts in association with spending cuts is the way to go). I simply pointed out that the projected surpluses were woefully inept prognostications.

[Zarathud]

I simply pointed out that the projected surpluses were woefully inept prognostications.

It's not about the surplus. It's about trying to balance the federal checkbook. Regardless of the budget projections, the pay-as-you-go system crafted in the 1990s would have forced spending cuts and limited the tax cuts. As the article says, the 4 fiscal conservative Republican holdouts are no longer enough to have a chance at preserving the pay-as-you-go system.

Bush will be spending more than political capital during his second term. And it's going to get ugly as the baby boomers retire, forcing the rest of the budget to make up the amounts it 'borrowed' from the Social Security program.