Bush Sets Record on Deficit: According to a chart released by Reuters last week, this year's $304 billion deficit that arose under the Bush Administration's watch is the largest in the last 30 years. Though many economists agree that temporary deficits at a time of a slowed economy are beneficial, most are concerned that the permanent commitment of the country's vital resources to providing permanent and costly tax cuts to the very wealthy will only create more trouble for the economy in the long-run. The Treasury Department issued a warning last week that the federal government would soon reach its current borrowing limit of $6.4 trillion, if Congressional action were not taken to raise it. As reported in the June 24 edition of the Watcher, this announcement regularly sets up a struggle between the Administration and Members of Congress, who do not want to appear to be spending beyond the government’s debt limit. As this Washington Post article points out, this most recent announcement is particularly troublesome, given that the President is also requesting a $674 billion tax cut.

This Administration has not made reducing the size and effectiveness of government a stated goal; however, the strides that are being made to devolve responsibilities to the states and to privatize government functions, deregulate and limit government oversight, and defund government by reducing federal (and often state) revenue through huge tax cuts, make the words unnecessary. One new and potentially effective tool in this effort to delimit the role of the federal government is the “Program Assessment Rating Tool,” or “PART.”

In looking at this President’s budget, it appears that he is trying to be all things to all people. If we are to believe the President, there can be large increases for defense, smaller increases for homeland security spending, and the creation of new, large tax breaks for the nation’s wealthiest, including the acceleration and making permanent of previously enacted large income tax breaks – as well as a rational restraining of most other federal spending to contain the large deficits predicted for FY 2004 and beyond. However, the reality is that the large tax cuts already passed, coupled with the large tax cuts now proposed and the spending increases in defense and homeland security, will put added pressure to reduce long-term spending on domestic discretionary and entitlement programs – or cause the deficit to balloon.

The National Priorities Project recently released two comprehensive reports that provide very useful state-by-state, as well as nation-wide, data. The Institute for Taxation and Economic Policy's Who Pays? A Distributional Analysis of the Tax Systems in all Fifty States shows that, on average, state and local tax systems require the poorest taxpayers to pay the highest effective tax rates.