George Washington is said to have compared the U.S. House to a boiling-hot pot of tea from which legislation flows into the cooling saucer of the Senate. Such was the effect of the Senate last week when it cooled, for a time, at least, a particular passion of President Bush: tax cuts.
As it boiled over from the House, the Bush plan would cut taxes by $726 billion over the next 10 years. The Senate cut that by more than half to $350 billion. Republican leaders hope to restore Bush’s entire tax cut package when both houses of Congress start reconciling their differences in a conference committee next week.
Let’s hope not. The White House has chosen to ignore the long-term impact of its tax and spending plans. It will be up to Congress to inject some reality in the deliberations.
The latest warning came from the Congressional Budget Office, which recently projected that Bush’s budget plans would run up a deficit of $1.82 trillion in the next decade, while its tax cuts would “provide a relatively small impetus” for the U.S. economy.
A majority of the Senate recognized that and responded sensibly. Support for Bush’s entire tax cut was razor-thin but holding steady until Tuesday, when the president requested $75 billion to fund military operations in Iraq. Within hours, moderate Republicans shifted the balance and the Senate voted 51-48 for a slimmed-down, 10-year tax-cut package. The Senate did the right thing. Attractive as they may be, tax cuts have to be resisted when they dig the government into a much deeper fiscal hole.
The Bush budget asks for more money for defense, health care, veterans, education, homeland security, energy, NASA, transportation and the environment, just for starters. Yet the budget would reduce the revenue available to pay for all the president’s desires.
Taken on their own, some of the tax measures hold appeal, particularly the elimination of double taxation of dividends. But when the White House and Congress show no interest in reining in spending, the threat of returning to huge and ongoing budget deficits is too great.
Even before the war costs were factored in, White House projections put the budget deficit at $304 billion this year, $307 billion next year and a total of more than $1 trillion by 2008, based on optimistic projections of economic growth. The proposed tax cuts account for $114 billion of next year’s projected deficit. War costs alone are now expected to drive the deficit toward $400 billion this year, even if other economic projections hold steady.
The government’s heart-stopping plunge from a $237 billion surplus in fiscal 2000 to a $304 billion deficit just three years later can be attributed partly to the economic downturn and partly to new homeland defense costs in the wake of the Sept. 11 terrorist attacks.
The government’s ability to recover now hangs on the tough decisions that the White House and Congress make about what the country needs and what it can afford. Passions to reduce taxes understandably boil hot in this president. But, if ever there was a time to cool his ardor for deficit spending, it is now.
