WASHINGTON – President Bush’s budget blueprint would bring the federal government’s budget deficit under control by decade’s end. But to do that without raising taxes, the White House would need a sweeping tax reform that it has avoided proposing and a swift end to the war in Iraq.
The budget plan for fiscal 2007 underscores what budget analysts of all political stripes have been saying for years: The goals of balancing the budget, waging a global fight against terrorism and making Bush’s first-term tax cuts permanent may be fundamentally at odds.
Under the budget plan, the deficit would jump from $318 billion last year to $423 billion in 2006, then slide back down to $183 billion in 2010. In 2011, the last year of the White House’s projection, the deficit would again begin to rise, to $205 billion, reflecting the cost of extending Bush’s tax cuts beyond their 2010 expiration date and enacting a proposed Social Security restructuring that would cost $57 billion in that year alone.
But even getting there requires some heroic assumptions.
The president’s budget acknowledges the cost of Bush’s call to make his tax cuts permanent – $1.35 trillion over the next decade and nearly $120 billion in 2011 alone.
But beyond 2007, the budget assumes no military expenditures in Iraq or Afghanistan and no effort to address the unintended effects of the alternative minimum tax, a parallel income tax system that was designed to hit the rich but has instead increasingly pinched the middle class. It also assumes Congress will cut domestic spending every year after 2007.
Those factors led Goldman Sachs economists to tell clients Monday that the deficit forecasts are “unrealistic.”
White House budget director Joshua Bolten said that something must be done about the alternative minimum tax. But beyond 2007, when Bush assumes a one-year provision to mitigate the tax’s effect on the middle class, Bolten said any fix should be part of a broader “revenue-neutral” restructuring of the tax system.
Such a revision, once viewed as a priority of the president’s, has disappeared from Bush’s political agenda.
“In the absence of even mentioning tax reform in his State of the Union address, it may be presumptuous to assume a revenue-neutral (alternative minimum tax) fix after 2007,” said Brian Riedl, a federal budget expert at the conservative Heritage Foundation.
The administration, for the first time, has spelled out anticipated spending on the wars in Iraq and Afghanistan in a formal budget document. Previously, the administration submitted requests for supplemental or emergency spending to cover costs. But the $50 billion in war funding for next year falls well short of the $120 billion that was requested for 2006. And no further war spending is included in future deficit projections.
“This budget is not going to happen,” said Stanley Collender, a federal budget analyst at Financial Dynamics Business Communications. “Of all the budgets I’ve seen recently, this is the one going nowhere the fastest.”
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
