- The Washington Times - Thursday, June 19, 2003

Clearly, America’s fiscal posture has changed dramatically in recent years. The 10-year unified budget deficit for fiscal years 2002 through 2011 was once projected to be $5.6 trillion. No longer.

As it happened, fiscal 2002 began three weeks after September 11. That same September, moreover, marked the end of three consecutive quarters of contraction in the nation’s economy, another development that had not been foreseen by budget forecasters. Meanwhile, the stock market was in the second year of a collapse in equity prices, which took away hundreds of billions of dollars in expected tax receipts. Several months earlier, President Bush shepherded a 10-year, $1.35 trillion tax cut through Congress.

In retrospect, therefore, it has become increasingly clear that the $4.25 trillion in projected budget surpluses over 10 years (i.e., what remains of the $5.6 trillion projection after consideration of the $1.35 trillion tax cut) proved to be utterly unattainable under the circumstances that greeted President Bush when he took office.

Apart from the inevitable budgetary consequences of inheriting a recession and fighting two wars, the very nature of budget projections engenders a large degree of skepticism. Look, for example, at the projections of the historic five-year (1998 through 2002) balanced-budget plan that Congress and President Clinton adopted in 1997. Before a projected surplus of $1 billion was to finally arrive in 2002, the plan forecast cumulative budget deficits of $316 billion during the preceding four years. In fact, a $69 billion surplus arrived in 1998, the first year. For the same four years, cumulative surpluses exceeded $550 billion, compared to projected deficits totaling more than $300 billion. This dramatic fiscal change occurred despite spending levels that far exceeded those projected in 1997. Revenues from the soaring stock market and an economy whose expansion was accelerated by the market bubble completely overwhelmed the additional spending.

Now, that process is working in reverse. The bursting of the Clinton-era stock-market bubble, the recession and the subsequent jobless recovery have combined to adversely affect tax revenues in a very significant way. Congressional Democrats, however, refuse to come to terms with this cause-and-effect relationship, prefering instead to place sole blame on the Bush administration. In addition, Democrats refuse to acknowledge that Mr. Clinton’s cuts in the defense budget would eventually necessitate a major buildup in this area, which September 11 merely accelerated.

Projecting a 10-year (2002-2011) unified deficit of $3.6 trillion, Democratic House Budget Committee staffers recently issued a report blaming the tax-cut policies of the Bush administration for “a swing of more than $9 trillion from the $5.6 trillion surplus projected over the same period two years ago.” Yet, considering the $1.35 trillion tax cut of 2001 and this year’s $350 billion tax-relief bill and extending each of their sunset provisions through 2011 (which would conservatively add another $800 billion), one can find just $2.5 trillion in tax relief supported by the Bush administration for the 2002-2011 period. In assessing the “swing of more than $9 trillion,” it is wrong to blame “the Bush administration’s tax cuts” for the deficits, as Democrats do.

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