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WASHINGTON DISPATCH

Bush Plan Fits Only in Tight Window

The president's budget is designed so that most of its costs fall outside the plan's five-year scope.

February 07, 2003|Peter G. Gosselin | Times Staff Writer

WASHINGTON — Federal budgets are often best remembered by their gimmicks.

Ronald Reagan's budgets were sneered at for their "rosy scenario" economic assumptions, while those of George H.W. Bush were said to be filled with "smoke and mirrors."

In the case of the current President Bush's new budget, the gimmick that could become its trademark might be called "out of the window."

Administration budgeteers have designed Bush's most prominent proposals so that much -- and, in some cases, virtually all -- of their costs fall outside the White House's five-year budget window. As a result, Bush has been able to propose gargantuan changes in everything from taxes to Medicare without having to explain how he would pay full freight for them.

"There aren't a lot of hard choices in this budget," complained William A. Niskanen, chairman of the libertarian Cato Institute in Washington.

Consider:

* Bush has included not one but two new and sometimes conflicting tax-cut proposals in the budget. His "jobs and growth package" would cost the government $390 billion in forgone tax revenue during the next five years, according to the Treasury Department. But it would cost almost that much again in the five years after that, Treasury estimates show. And the costs would keep rising.

Meanwhile, the president's new savings tax breaks would actually make money for Washington during the next five years, as Americans agree to pay more taxes up front to get bigger breaks later on. Of course, once taxpayers start to take full advantage of the breaks, the government would begin losing money -- fistfuls of it, according to some analysts. But those losses would show up only a decade or more from now, out of the budget window.

* In addition to the new tax cuts, the president wants to make his already enacted 2001 tax cuts permanent. As things now stand, those cuts are due to expire at the end of this decade.

Treasury estimates that the proposal would cost the government more than a half-trillion dollars in forgone revenue in just its first three years. But because the costs are almost a decade away, they too are out of the budget window.

* In his State of the Union address last week, Bush promised $400 billion for a prescription-drug benefit for seniors and an overhaul of Medicare, the government's health insurance program for the elderly.

But the budget shows that only $130 billion, or one-third, of his proposal's costs would occur in the next five years and therefore have to be handled by this administration. The remaining $270 billion would be felt in the following five years -- again, out of the budget window.

To be sure, a key reason that so many costs of the president's proposals fall beyond the reach of his own budget is that the White House decided to shrink the time frame for its latest tax and spending plan from 10 years, which both the current administration and the Clinton White House had used, to five.

That has come in for its own round of criticism. Democrats charge that the Bush folks misused the earlier 10-year numbers to show that Washington could afford the 2001 tax cuts. Now they are switching to five-year figures to minimize the deficits that, critics say, those tax cuts helped to cause.

But independent experts generally applaud the idea of dropping 10-year numbers, saying that the federal budget has proved too big -- and the nation's economy too complex -- to make reliable predictions over such a long period.

What troubles the experts is that the administration has not so much dispensed with 10-year budget plans in favor of five-year ones as given up trying to explain how it would pay for proposals whose costs run beyond five years. What also disturbs them is that the administration has divulged few details about anything, from Medicare's overhaul to the estimated cost of a war against Iraq.

"It's startling how little we know," said Joseph Antos, a health policy expert with the generally conservative American Enterprise Institute. "It's really unusual that the specifics of a major proposal like Medicare aren't public by now."

In fact, Medicare offers a microcosm of the problems that the administration appears to have created by adopting a five-year budget window.

The window allows the administration to portray the costs of a prescription-drug benefit, which many feel is prohibitive, as well in hand. It also lets them show the total budget deficit would rise to $300 billion-plus in the next two years, and then fall -- a pattern that suggests the red ink also is under control.

But analysts such as Antos say that the foreshortened time frame seems to have blinded administration budgeteers to the long-term consequences of their own proposals. Indeed, one chart included in the budget belies the White House's own sanguine assessment. It shows entitlement costs skyrocketing beyond the five-year window, especially if the GOP's own Medicare drug benefit kicks in.

"They don't seem to feel the need to offer a solution to the budget problem they pose," Antos said.

In the end, being tarred with the "out-of-the-window" label may be the least of the president's worries. The bigger issue, Bush may find, is that his budget gets thrown "out of the window" altogether by a Congress bent on substituting its own plan.

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