OMB?S Mid-Session Budget Review: Rosey Pays Another White House Visit
by Guest Blogger, 7/22/2002
It comes as no surprise that the budget review issued by the Office of Management and Budget on July 19, 2002, shows a higher deficit for 2002 than predicted in its February 2002 report—from a $106 billion to a $165 billion deficit. In spite of the increasing deficit, OMB is optimistic about a quick return to budget surpluses in 2005, which are estimated to continue to increase over the next decade. In other words, according to OMB, this has been a rough time, but the President’s economic and fiscal policies, particularly the tax cut, insure that the long-term outlook couldn’t be better.
We are less than confident in OMB's rosey predictions.
- The prediction of a return to surplus in 2005 conceals the fact that the surpluses include the Social Security surplus, which is supposed to be “off-budget” revenue and considered separately from “on-budget” general revenue. If the Social Security revenue is not counted, there are budget deficits in every year through 2012.
- OMB bases its projections on the assumption that there will be “a resumption of growth in tax payments produced by a stronger economy and a stronger stock market.” Given the uncertainties of the economy and the continued decline of the stock market, a return to surpluses, even including Social Security revenue, may be over-optimistic, unless there are huge cuts in spending.
- We would agree with OMB that the primary reasons for the increased deficit this year and in the short-term has been the economic recession, the declining stock market fueled by daily accounts of corporate malfeasance, and the resources required to response to the September 11 attacks. The biggest cause of long-term deficits is, however, the tax cut, and especially the effects of the tax cuts scheduled to go into effect after 2004, which mainly benefit the wealthiest of Americans.
OMB’s predictable response to the economic uncertainty is that spending must be “tightly restrained.” Ultimately, debates about the extent of budget deficit, the precise time that the budget will return to surplus (or not), and even who caused the deficit, disguise the underlying politics of the budget. The Administration’s policy is to use the deficit situation (while putting some sugar coating on it) and economic uncertainty to impose limits on spending. (Spending on tax cuts doesn’t, according to this view, count as spending, but as economic stimulus.) The effort to shrink government can be most effectively accomplished by giving tax cuts to the top 1% of the population and to corporations, while cutting government spending that benefits ordinary Americans, states and communities, and the environment.
In other words, in spite of rhetoric about tightening regulations to prevent corporate jimmying of the books, the wealthy and corporate interests are given preference over the rest of us. Never mind that economic stimulus might better be accomplished by helping get the unemployed to work through training programs, or assisting the struggling working poor so they can keep on working, or educating a new generation of Americans to prepare them for the future, or any of the other ways that government spending could both address our stated belief that everyone should have an opportunity to succeed as well as keeping the economy fueled with skilled workers, now and in the future.
Not only are tax cuts seen as the only solution, but the next major phase-in of the tax cuts scheduled for 2004 are not tax breaks for ordinary Americans, most of which have already gone into effect, but rather additional tax breaks for the wealthiest. The disparity of the tax cuts is striking. According to a report by Citizens for Tax Justice, while the top 1% of the rich have already received a “down payment” on their tax cuts—averaging just under $12,000 each this year, 80% of their tax cuts is scheduled to come from changes won’t take effect until after 2004. Not only do the tax cuts make a $1.4 trillion dollar dent in the budget over the next decade, they will also give the most breaks to the wealthiest, while ordinary Americans, who want a good education for their kids, a prescription drug benefit for seniors, and Social Security for their retirement, will have to make up the difference. For example, see the Center on Budget and Policy Priorities’ report comparing of the costs of the tax cut, particularly for benefits going to the top 1%, and the cost of a prescription drug benefit.
In other words, OMB’s report basically says that tax cuts for the wealthy are good, but spending for the priorities of ordinary Americans must be cut. Then, we’ll have surpluses once again, when it will, no doubt, be time for another round of tax cuts aimed at the wealthy and corporations.