New piece in PRISM

Just got the September/October issue of PRISM magazine in the mail.

I was an editor and staff writer at "America's alternative evangelical voice" for the magazine's first seven years and I've just started contributing again to it's "Washington Watch" segment.

It's a little tricky to write about the "current goings on" in Washington when: A) you're in Media, Pa., and B) you've got a bi-monthly's almost-four-month lead time. I posted the Sept./Oct. column here, and it seems to have aged well.

I'm a little worried about the column for November/December, though. It's on the deficit — a problem that would not go away during the next three months. Since submitting that article, though, President Bush has already asked for an additional $87 billion for one year of operations and rebuilding in Iraq. And reports hint that another $50-60 billion could be necessary just for 2004.

By the time my rather pessimistic article sees print, it may turn out to be inaccurately sunny.

Here's a taste:

In January 2001 the Congressional Budget Office projected a 10-year federal budget surplus of $5.6 trillion dollars. Then came a recession, terrorist attacks, two wars, three massive tax cuts and unrestrained spending growth.

In August 2003 the CBO projected a 10-year budget deficit of $1.4 trillion. This $7 trillion swing is so large that we have to inflate Sen. Everett Dirksen's famous observation by a factor of 1,000: "A trillion here, a trillion there, pretty soon you're talking real money."

That CBO figure is a projection, not a prediction. The budget office's job is not to say what is likely to happen, but to provide a neutral measurement — a baseline — of current laws and policies without assuming any changes.

This means, for example, that the Medicare prescription drug benefit passed by both houses of Congress is not included. The estimated 10-year cost of that program is around $500 billion. The liberal Center on Budget and Policy Priorities estimates that the total cost of such spending not included in the baseline is an additional $1.9 trillion.

In order to keep down the projected revenue loss from the three recent tax cuts, those cuts were passed with "sunset" provisions. Aspects of these short-term cuts will expire between 2004 and 2010. But President Bush and the leadership of the House and Senate have said they intend to make sure these cuts do not expire, and it is unlikely they will.

The Concord Coalition, a nonpartisan balanced-budget advocacy group, says that extending the cuts past the sunsets will add another $1.8 trillion to deficits in the next decade. …

Today, the baby boom generation is part of the work force, contributing to Social Security and Medicare. Since they are larger than any other American generation, the system is now taking in more money than it is paying out. This is good, because in a few years the baby boomers will begin retiring. That will mean far fewer people paying in to the system and a lot more people collecting from it. The surplus in the trust fund today will cover the deficits of the trust fund tomorrow.

Except, well, we've been using that trust fund money for other things — like tax cuts and increased spending.

The 2003 deficit — about $401 billion — is really well over $600 billion when we include the cost of the funds "borrowed" from the Social Security trust fund. One group of deficit hawks on the House Budget Committee projects a 10-year deficit of $6.3 trillion when the costs of this borrowing are included.

Perhaps the most misleading variable in the CBO's baseline is its projection that government spending will continue at about current levels for the next 10 years, increasing by less than the rate of inflation. The Concord Coalition notes that this is only one-third the rate at which spending has grown in each of the past five years. If spending continues to grow at its current rate, add another $2.8 trillion to the projected 10-year deficit.

The CBO's $1.3 trillion projection actually looks optimistic when you begin to account for all the likely developments it fails to include. The CBO itself says a more likely outcome — including extension of the tax cuts, the Medicare drug benefit and other new spending — is a 10-year deficit of $4.4 trillion. That's in line with predictions from the Concord Coalition ($4.2 trillion), the Center on Budget and Policy Priorities ($5.1 trillion) and the investment firm Goldman-Sachs ($4.5 trillion).

In other words, this is bad.

It's so bad that the International Monetary Fund recently lectured the United States in a tone usually reserved for the prodigal economies of the developing world. "Decisive action will need to be taken over the coming years to re-establish a strong U.S. fiscal position," the fund wrote. Blaming America's fiscal crisis in part on "the recent tax cuts," the IMF warns that America's exploding deficits will "crowd out investment and
erode U.S. productivity growth."

I'm starting to wish I had read all those Krugman interviews before I submitted that last month.