© 2002 Copley News Service, 1/31/2002
As a rookie columnist, I have always tried to be fair in recognizing good ideas, whether they come from Democrats or Republicans, and when I criticize what I believe to be ill-considered ideas, I do so on substantive grounds so as to avoid making ad hominem attacks. So I was disappointed to hear Democrats make false claims about us returning to an era of deficits and fiscal profligacy when the Congressional Budget Office reported that it was reducing its 10-year budget surplus projection from $3.4 trillion to “only” $1.6 trillion.
First, CBO projections are seldom accurate. Second, projected deficits last for only two years and amount to a paltry 0.16 percent of a $10 trillion-plus GDP. That, folks, while not a surplus, is a budget in balance within rounding error.
Senate Democratic Leader Tom Daschle and Michigan Sen. Debbie Stabenow went beyond the bounds of acceptable political hyperbole, making one of the most partisan attacks on President George W. Bush I have yet heard. The distinguished senators accused Bush of putting Social Security “at risk” with his tax cut the same way Enron executives cashed out their stock at the expense of employees’ retirement funds.
This was not only a personal attack on the president, it was also a shameful distortion of the facts calculated to prey upon the fear and vulnerability of Social Security recipients, of which I am one. Stabenow said, “There’s a real feeling that this (tax cut) is a lot like Enron, where the folks at the top take their money out and leave the middle-class taxpayers paying for it through their retirement funds and loss of 401(k).” Daschle was even more brutal: “I don’t want to ‘Enron’ the people of the United States. I don’t want to see them holding the bag at the end of the day, just like Enron employees have held the bag. I don’t want to destroy their Social Security system.”
Here are the facts, dear reader. You decide.
1998 – Contrary to CBO’s forecast of slow economic growth and 10-year budget deficits of $2 trillion, the economy grew by 4.3 percent, and a $69 billion surplus emerged as a consequence.
January 1999 – CBO reversed its projection of a decade of deficits to a decade of surpluses – $2.3 trillion worth to be exact.
January 2000 – CBO raised its 10-year surplus projection to $3.5 trillion.
Summer and fall, 2000 – George W. Bush campaigned for president on the promise that he would spend $1.3 trillion of the projected $3.5 trillion surplus to cut tax rates across the board. Voters thought a $1.3 trillion tax cut combined with $2.2 trillion in budget surpluses sounded about right and elected him to the Oval Office.
January 2001 – While President-elect Bush and Vice President-elect Dick Cheney were warning of an impending recession and smaller surpluses, CBO hiked its projected 10-year budget surplus to $5.6 trillion.
June 2001 – With significant Democratic support, a $1.2 trillion tax cut was signed into law, in large part because it had become clear to everyone that the economy was in trouble.
August 2001 – Factoring in so-called “revenue loss” due to the recently enacted tax cut and accounting for the slowing economy, CBO reduced its 10-year surplus projection to $3.4 trillion, bringing it back down to virtually the same level it had projected in 2000 without tax cuts.
January 2002 – With the economic recession well under way and the government confronting the need to make large new expenditures in the aftermath of the Sept. 11 terrorist attacks, CBO reduced its 10-year surplus projection to $1.6 trillion. Twenty-nine percent ($514 billion) of the $1.8 trillion surplus reduction is attributable to an increase in discretionary spending, 71 percent ($1.3 trillion) is attributable to the recession. None of the reduction in the projected surplus since last year is attributable to the tax cuts. None. Nada. Zip.
Footnote – CBO projections continue the past practice of underestimating the degree to which economic growth historically has generated growth in revenues. Based on CBO’s own economic assumptions, if revenues grow relative to GDP as they did historically since 1986, projected surpluses will actually amount to $3.6 trillion during the coming decade.
Make no mistake about it, economic growth produces surpluses, recessions cause deficits. And if you want to soak the rich, lower tax rates. When we did in 1981 and again in 1986, the income tax paid by top 1 percent rose from 17.6 percent in 1981 to 27.5 percent in 1988. It’s time to soak the rich again.