- The Washington Times - Tuesday, March 27, 2007

The Bush-Cheney administration inherited a fiscal-policy trend that had generated four consecutive unified budget surpluses (1998-2001), including a 2000 mega-surplus of $236 billion, which effectively placed that year’s $150 billion Social Security surplus into the once-fabled-but-long-since-discarded “lock box.” During the first five fiscal years of the Bush-Cheney era (2002-2006), cumulative unified budget deficits have exceeded $1.5 trillion, averaging more than $300 billion per year. Excluding the Social Security surpluses from these unified deficits yields an average on-budget deficit of $470 billion per year over the 2002-2006 period.

The administration has been running victory laps ever since its fiscal 2008 budget, released in early February, projected on-budget deficits of $427 billion in 2007 and $451 billion in 2008. The president’s 2008 budget also projects a unified surplus of $61 billion in 2012. To achieve that unified surplus, the 2012 budget will have to draw on a Social Security surplus expected to total about $250 billion in 2012. In other words, more than a decade of uninterrupted economic growth (and, thus, a record-long business expansion) will have transpired from one unified surplus ($128 billion in 2001) to the next ($61 billion in 2012).

Alas, the Congressional Budget Office (CBO) reviewed the president’s 2008 budget blueprint and concluded that the ever-elusive unified surplus will not be achieved over the next 10 years. President Bush’s budget plan would generate more than $1 trillion in cumulative unified budget deficits from 2008 through 2017, CBO estimates. That actually represents a huge improvement over the previous five years.

Unified deficits would average about $105 billion per year during the 2008-2017 period, CBO projects. They would be kept that “low” because the average on-budget deficit of $330 billion per year would be offset by an average annual Social Security off-budget surplus of about $225 billion.

These dire on-budget deficit estimates would be much worse were it not for numerous implausible assumptions. Derived during the sixth year of the current business expansion, the economic assumptions implicit in both the White House and the CBO projections suggest that there will be no recession during the next 10 years. These projected on-budget deficits (an average of $330 billion per year for 10 years) were also calculated under the assumption that funding for the administration’s Global War on Terror will decline from about $175 billion in 2007 to zero in 2010 and remain zero through 2017. They assume a Democrat-controlled Congress will implement 10-year savings of $232 billion in Medicare. They assume domestic discretionary outlays will decline during each of the next five years and then increase only by the rate of inflation for the following five years (2013-2017). And they assume there will be no patch for the alternative minimum tax, forcing tax increases on tens of millions of middle-class households. Welcome to fantasy land.

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