Paul Krugman: The Vanishing Future

Unlinkable. Warning: it’s impossible to read without raising your blood pressure.

The Vanishing Future
Published: February 10, 2006

At this point we’ve had six years to grow accustomed to Bush budget chicanery. (Yes, six years: George W. Bush’s special mix of blatant dishonesty and gross irresponsibility was fully visible during the 2000 presidential campaign.) What still amazes me, however, is the sheer childishness of the administration’s denials and deceptions.

The story begins in 2001, when President Bush was pushing his first tax cut through Congress. At the time, the administration insisted

that its tax-cut plans wouldn’t endanger the budget surplus bequeathed to Mr. Bush by Bill Clinton. But even some Republican senators were skeptical. So the Senate demanded a cap on the tax cut: it should not reduce revenue over the period from 2001 to 2011 by more than $1.35 trillion.

The administration met this requirement, but not by scaling back its tax-cutting ambitions. Instead, it created fictitious savings by “sunsetting” the tax cut, making the whole thing expire at the end of 2010.

This was obviously silly. For example, under the law as written there will be no federal tax on the estates of wealthy people who die in 2010. But the estate tax will return in 2011 with a maximum rate of 55 percent, creating some interesting incentives.

I suggested, back in 2001, that the legislation be renamed the Throw Momma From the Train Act.

It was also obvious that the administration had no intention of abiding by its concession to fiscal prudence, that it would try to eliminate the sunset clause and make the tax cuts permanent.

But it quickly became clear that the budget forecasts the administration used to justify the 2001 tax cut were wildly overoptimistic. The federal government faced a future of deficits, not surpluses, as far as the eye could see. Making the tax cut permanent would greatly worsen those future deficits. What were budget officials to do?

You almost have to admire their brazenness: they made the future disappear.

Clinton-era budgets offered 10-year projections of spending and revenues. But the Bush administration slashed the budget horizon to five years. This artificial shortsightedness greatly aided the campaign to make the 2001 tax cut permanent because it hid the costs: since budget analyses no longer covered the years after 2010, the revenue losses from extending the tax cut became invisible.

But now it’s 2006, and even a five-year projection covers the period from 2007 to 2011, which means including a year in which making the Bush tax cuts permanent will cost a lot of revenue — $119.7 billion, but who’s counting? Has the administration finally run out of ways to avoid budget reality?

Not quite. As the Center on Budget and Policy Priorities points out, until this year budget documents contained a standard table titled “Impact of Budget Policy,” which summarized the effects of the administration’s tax and spending proposals on future outlays and revenues. But this year, that table is missing. So you have to do some detective work to figure out what’s really going on.

Now, the administration has proposed spending cuts that are both cruel and implausible. For example, administration computer printouts obtained by the center show that the budget calls for a 13 percent cut in spending on veterans’ health care, adjusted for inflation, over the next five years.

Yet even these cuts would fall far short of making up for the revenue losses from making the tax cuts permanent. The administration’s own estimate, which can be deduced from its budget tables, is that extending the tax cuts would cost an average of $235 billion in each year from 2012 through 2016.

In other words, the administration has no idea how to make its tax cuts feasible in the long run. Yet it has never, as far as I can tell, allowed unfavorable facts to affect its determination to make the tax cuts permanent. Instead, it has devoted all its efforts to hiding those awkward facts from public view. (Any resemblance to, say, its Iraq strategy is no coincidence.)

At this point the administration’s budget strategy seems to be simply to ignore reality. The 2007 budget makes it clear, once and for all, that the tax cuts can’t be offset with spending cuts. But Bush officials have decided to ignore that unpleasant fact, and let some future administration deal with the mess they have created.

The Discussion: 8 Comments

Sorry, but I have to admit that there’s something going totally wrong going on!
(Maybe because of China?)

February 10, 2006 @ 12:27 am | Comment

Perhaps Marx’s prediction about the United States will yet come true?*

February 10, 2006 @ 7:16 am | Comment

Thanks to articles like this which I send to my sister, a former knee-jerk Republican, she has had her eyes opened to the true state of affairs. Thanks for telling the truth in a manner which can be understood by the average person. Please keep up the good work.

February 10, 2006 @ 7:44 am | Comment

Wait, people take Krugman seriously?

February 10, 2006 @ 1:04 pm | Comment

Hey Johny K…Krugman is a brilliant economist, a professor, and a columnist who always makes sense. he knows a zillion times more about his area of expertise than what a neocon like you does. Instead of snarky and stupid comments, why don’t you dispute the factual details of his article.

February 10, 2006 @ 1:34 pm | Comment

What has separated Paul Krugman from almost every other columnist in existence is his ability to get to the truth despite all the fog and slime put forth by the Republican/conservative machine. From the beginning he knew Bush was a counterfeit put into circulation by dark political forces determined to destroy this republic by whatever means available. He was never fooled by that “war president” bullshit, nor could Alan (I’m really a dick after all) Greenspan’s patent nonsense about those stupid tax cuts being acceptable because “there is danger of paying down the national debt too fast.” When practically the entire country was sucked into this silly charade, Krugman stuck to his guns and has been proven right.

February 10, 2006 @ 9:37 pm | Comment

Johnny K., want to come back and argue like a man? (Johnny K. is smart and a decent guy, but he’s a young Republican, God help him.)

February 11, 2006 @ 2:28 am | Comment

Well, Swift Boat Johnny is certainly a quick study of Republican tactics!

February 12, 2006 @ 6:13 am | Comment

RSS feed for comments on this post. TrackBack URL

Sorry, the comment form is closed at this time.