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NEWS ANALYSIS

Bush Budget Has a Long Reach

If enacted, the tax and spending plan would be an about-face on a scale of those by LBJ, Reagan.

March 09, 2003|Peter G. Gosselin | Times Staff Writer

WASHINGTON — Two months after the White House began rolling out its latest budget, the full dimensions of President Bush's new tax and spending plan are finally coming into view, and they are even more sweeping than originally thought.

By linking expenditures forced on the nation by the 2001 terrorist attacks with a blizzard of other measures, Bush has produced a proposal that, if enacted, would result in a governmental about-face as far-reaching as those of Lyndon B. Johnson or Ronald Reagan.

Coupled with his already-approved 2001 cuts, the president's new tax package would make Bush the biggest tax cutter in at least two decades and possibly half a century. He would top even Reagan.

His proposed defense buildup would be bigger in real terms than Johnson's Vietnam buildup, and that's not counting the cost of a war with Iraq and its aftermath.

His plan to revamp Medicaid and other programs Washington runs jointly with the states would be, in the words of a former Nixon administration budget official, "one of the biggest pullbacks in federal responsibility we've ever seen."

"Frankly, I'm pretty surprised," said Richard P. Nathan, now director of the Rockefeller Institute of Government at the State University of New York in Albany. Until now, "we never heard much about this from this president."

Administration officials have freely acknowledged that the combination of big tax cuts, substantial new spending and dramatic shifts in programs would push the government, which was running surpluses only two years ago, into a deficit. But they have portrayed the problem as entirely manageable.

However, Congress' top fiscal analyst said Friday that the deficits the president's plan would generate would be substantially bigger than previously thought. And a close look at the White House's own estimates suggest they would be vastly more enduring than the administration has suggested.

The nonpartisan Congressional Budget Office said the new Bush budget would produce a steady stream of deficits over the next decade, totaling $1.8 trillion, and the agency indicated the proposal's effects would be even larger than that.

Analysts said that absent the president's plan, Washington would run a nearly $900-billion surplus over the next decade.

Yet even these figures miss a crucial aspect of the effect of deficits under the Bush plan -- one that the administration's own forecasts reflect but that officials have barely mentioned.

In contrast to the White House budget of last year, which showed the government climbing quickly out of deficits and running surpluses for most of the next two decades, its latest budget concludes that as things now stand, Washington is unlikely to ever again operate in the black.

In a long-term forecast buried deep in its new, five-volume budget, the administration shows that after growing during the next two years to 2.8% of gross domestic product then shrinking a bit, the deficit begins an inexorable expansion.

The burgeoning deficit is driven by the president's proposals and the mounting costs of retiring baby boomers. Administration estimates show the combination would drive the deficit back above 2% of GDP by 2020, above 5% of GDP by 2030, to nearly 9% by 2040 and so on.

Citing former Nixon economist Herb Stein's nostrum that "if something can't go on forever, it won't," analysts across the political spectrum said that in such circumstances something would have to give. For this administration, the something would be government spending.

"We're going to have to shrink the size of government," said Grover Norquist, president of Americans for Tax Reform, a conservative advocacy group with close ties to the White House. "Our goal is to cut it in half."

The only times in the last century that the government has shrunk by half were in the immediate aftermath of World Wars I and II.

Part of the reason that analysts have been so slow to come to grips with the dimensions of the administration's new budget is that Bush and his key aides have chosen not to trumpet the boldness of many of their proposals, especially some of the most controversial. Officials acknowledge as much in comments about their plan.

Asked to compare the new Bush budget with Reagan's controversial 1981 proposal, for example, White House budget director Mitchell E. Daniels Jr. pointed to the similarity of combining tax cuts and defense spending hikes. But he added, "What you haven't seen here, as opposed to the 1980s, is any attempt to terminate an entire department or zero out a program."

Daniels' Reagan-era predecessor David Stockman set off howls of protest by calling for the consolidation or elimination of hundreds of federal programs from the Legal Services Corp. to Amtrak subsidies.

But the dimensions of the Bush budget are finally coming into focus, and at each turn they are they are bigger than almost anyone had previously thought.

Tax Cuts

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