[Gimpy]

well here's another "viewpoint"!

********************************


David Lazarus Wednesday, May 28, 2003

--------------------------------------------------------------------------------



I have a kid at home, so we'll be getting a $400 tax-cut check from the federal government this summer.

Thanks, Mr. President.

I have a kid at home, so he can look forward to being saddled with a budget deficit of as much as $2.7 trillion a decade from now, according to the nonpartisan Congressional Budget Office.

He can look forward to a national government with such onerous debt obligations that it barely has enough money for schools, health care and social programs.

He can look forward to such a huge shortfall in government revenue that the limit on federal debt had to be raised last week by nearly $1 trillion (to $7. 4 trillion) to prevent the United States from defaulting on its loans.

Thanks, Mr. President.

I've written on this subject before and I don't mean to cover old ground. But it's astounding that so little attention is being paid to this potentially catastrophic problem as President Bush and his Republican pals continue hacking away at America's tax base.

The House and Senate approved a $350 billion tax cut last week. That's less than half the amount sought by the White House, but Bush has already signaled he'll be pushing for additional cuts every year for the foreseeable future.

The president, who already has slashed federal taxes by $1.35 trillion, will sign the latest tax cut into law today.

Meanwhile, the Congressional Budget Office estimates that the federal budget deficit will top $300 billion this year -- a record high -- and this doesn't even include the new tax cut.

Experts say that factoring in today's cut will push this year's deficit close to $400 billion. That translates to about 4 percent of the $10.5 trillion U.S. economy, which isn't as worrisome as the almost 5 percent ratio racked up by the first President Bush's $290 billion deficit.

Then again, we've never run shortfalls of this magnitude for such a prolonged period of time.

"We are obviously going to have deficits as far out as the eye can see," said Michael Lehmann, an economics professor at the University of San Francisco. "That means we'll have to keep borrowing funds to pay our debts, and the deficit thus continues to increase."

Bush, of course, sees things differently. The disadvantages of deficits, he says, are far outweighed by the advantages of tax cuts.

"We believe the more money people have in their pockets, the more likely it is somebody is going to be able to find work in America," Bush said last week.

This would be because people go out and spend all their newfound cash, thus increasing demand for goods and services, thus bolstering corporate bottom lines, thus creating more jobs.

That's the idea anyway. The problem here is that Bush's tax cuts overwhelmingly favor the wealthy, who already have little difficulty buying whatever they please.

"If your goal is to boost spending and create jobs, the tax cut doesn't make much sense economically," Lehmann said. "If you really want to boost spending, you give more money to the lower-income folks."

Today's cuts will save average middle-class households just $217, according to the Urban Institute-Brookings Tax Policy Center. Those earning $1 million annually will score an average $93,500.

In other words, two-thirds of the tax break will go to the top 10 percent of wage earners.

For the record, Bush reported income last year of $856,056. Vice President Dick Cheney, who cast the tie-breaking vote to pass the tax-cut bill in the Senate, reported income of $1.2 million.

Alan Auerbach, a UC Berkeley economist, said it's too soon to dismiss the stimulative power of Bush's latest tax cut.

"It could have some benefit over the short run," he said. "Over the long run, though, it's going to be very damaging."

Debt payments for runaway budget deficits, Auerbach observed, siphon money away from other uses, such as hiring more teachers for overcrowded public schools or providing health care for the needy. They also drive up interest rates.

No less an authority than Federal Reserve Chairman Alan Greenspan warned last week that rising interest rates will harm the economy by making money more expensive for consumers and businesses.

"Deficits do matter," he said. "In any evaluation of a program, what happens to deficits is an integral part of the analysis."

As it stands, Auerbach and other economists believe Bush is deliberately using record deficits as a lever to reduce government spending. By this thinking, congressional leaders will have no choice in the future but to trim expenditures.

"That could be the case," Auerbach said. "But it's going to be very, very painful. We're talking about massive cuts in Medicare, Medicaid and Social Security. Without cutting defense or implementing tax increases, that's the only place the money can come from."

I have a kid at home. This is the future he can look forward to: A staggering debt level and a social safety net so tattered that all but the most financially independent slip through the holes.

"That sounds about right," Auerbach said. "It's a depressing prospect."

Thanks, Mr. President.


******************************

Now THAT'S the REAL "truth"!