the establishment worries

[Eubulides <paraconsistent@xxxxxxxxxxx>]

washingtonpost.com
Fiscal Doomsday in the Offing
By David S. Broder
Sunday, October 5, 2003; Page B07


Maybe all the others are wrong. Maybe those in the Bush administration who claim we can grow
our way out of these big budget deficits if we just keep cutting taxes to stimulate the economy
know something no one else grasps. But if I had to bet my grandchildren's future prosperity on
anyone, I would not bet that way.

I would not be that foolhardy, not when the list of people warning that this nation has
embarked on a dangerous and unsustainable fiscal course that will wreck our economy and
threaten our international standing includes those who now are frantically signaling us to
straighten out our policies before it is too late.

Some members of Congress of both parties have argued for months, if not years, that the lack of
spending restraint, coupled with the penchant for ever-larger tax cuts, cannot be allowed to go
on. Their cautions have gone unheeded.

Now they are finding credible allies. David Walker, the comptroller general of the United
States, is an appointed official with a 15-year term that gives him complete political
security. His staff in the General Accounting Office provides the fullest range of information
on government finances. Last month, Walker went to the National Press Club to raise a public
alarm where he hoped it would be heard. "Our projected budget deficits," he said, "are not
manageable without significant changes in status quo programs, policies, processes and
operations."

Last week three organizations that had not previously collaborated joined at the press club to
spell out in specific terms what David Walker meant. The Committee for Economic Development, a
group of business and education leaders; the Center on Budget and Policy Priorities, a
liberal-leaning research and advocacy group; and the Concord Coalition, a bipartisan
organization focused on sound fiscal policy, issued their first joint statement on fiscal
policy. They called the current budgetary situation "the most fiscally irresponsible" in
American history.

Staff members of the three groups said that a realistic picture of the next decade shows it is
likely that annual deficits will rise from current levels of $400 billion to more than $600
billion and total $5 trillion between 2004 and 2013 -- even assuming a quick return to healthy
economic growth and lower unemployment.

Those numbers are incomprehensible. But a better sense of their meaning comes when the groups
say that if current policies remain, balancing the budget by 2013 will require raising
individual and corporate income taxes by 27 percent, cutting Social Security by 60 percent,
cutting defense by 73 percent or cutting all programs -- except defense, homeland security,
Social Security and Medicare -- by 40 percent.

That sounds like scare talk. But the reality is that after 2013, things will get worse. The
first of the baby boomers reach retirement age in 2008, and from that point on, Social Security
and Medicare payments will explode, as the number of claimants rises each year. As Pete
Peterson, the Republican former secretary of commerce, told the news conference where this
report was presented, anyone who thinks those programs are solidly financed ought to think
again. "To talk about a Social Security trust fund is a fiscal oxymoron," he said. "It isn't
funded and it can't be trusted." Rather, the government faces $25 trillion of unfunded
entitlement obligations.

Is this just scare talk? Peterson, a major financier, does not think so. Neither does another
panelist, Robert Reischauer, the former head of the Congressional Budget Office. And neither
does Robert Rubin, the former Clinton administration treasury secretary who helped design the
policies that briefly put the federal budget into surplus and contributed to the economic boom
of the late 1990s.

Rubin said, "There is no question that these [budgetary] conditions pose a very serious threat
to our economy." The massive borrowing that the government will have to do to finance these
deficits will shrink the supply of capital available to the private sector when it needs to
expand, and will force up interest rates "to substantially higher levels. It is a virtual
certainty there will be a day of reckoning."

Are all of them wrong? I would love to think so. But I hate to bet my grandchildren's future on
it -- as we are doing now.

davidbroder@xxxxxxxxxxxx