- The Washington Times - Wednesday, March 26, 2008

ANALYSIS/OPINION:

Like the Bush administration, and unlike a growing number of private-sector forecasters, the Congressional Budget Office (CBO) projects that the economy will probably dodge a recession this year. After growing by 2.2 percent in 2007, the economy will expand by 1.9 percent in 2008 and 2.3 percent in 2009, according to the CBO’s latest (February) forecast. Meanwhile, in part because of the economic-stimulus package, which will cost about $150 billion in fiscal 2008, the CBO has projected that the budget deficit will increase from $162 billion last year to $396 billion this year.

Given a set of unrealistic assumptions, which the budget agency is statutorily required to accept when it conducts its comprehensive annual review of the administration’s budget, the CBO projects that the tax and spending policies outlined in President Bush’s fiscal 2009 budget would generate declining budget deficits in 2009 ($342 billion), 2010 ($182 billion) and 2011 ($129 billion). In fiscal 2012, the overall budget would finally reach balance, followed by a tiny, overall surplus of $21 billion in 2013.

Returning to the promised land of an overall (or unified) budget surplus requires accepting assumptions that have nothing to do with reality. Funding for the war on terror, for example, would have to plunge from nearly $200 billion this year to $70 billion in fiscal 2009 and to zero every year thereafter. Also, the revenue-enhancing alternative minimum tax (AMT), which is routinely “patched” to prevent it from expanding further into middle- and upper-middle-income households, would have to be applied to nearly 30 million households that are now annually exempted. Or, in the likely event that the AMT continues to be patched, a comparably sized alternative revenue source would have to be found.

Even though the Bush administration wants to permanently patch the AMT in a revenue-neutral way, congressional Republicans steadfastly oppose such a move. In addition to defunding the terror war and unleashing the AMT, Congress would have to reduce the explosive growth projections for Medicare and Medicaid that the president has recommended. And legislators would also have to slash inflation-adjusted annual outlays for non-security discretionary spending by more than 20 percent between now and 2013.

To achieve a small surplus in fiscal 2013, which would be the 12th year of uninterrupted economic growth, we would have to break open the once-hallowed Social Security “lockbox” and pilfer nearly a quarter of a trillion dollars. And that is the optimistic scenario that has nothing to do with … well … if … a recession.

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