The Bush Budget
More the military and more
by Dean Baker
In These Times magazine,
There are few surprises in President
Bush's 2005 budget. The main contours follow the same pattern
as his past budgets, with more tax cuts oriented toward the wealthy
and increased spending on the military and homeland security.
The result of this pattern of taxation and spending is large deficits
that will prove unsustainable in the not-very-distant future.
At first glance, increases in military
spending in the Bush budget do not appear very large. The budget
proposes that military spending increase to $467 billion in 2009
from $433 billion in the 2004 budget, with spending actually declining
slightly to $429 billion in 2005. However, the proposed spending
does not include any appropriations for the occupations of Iraq
and Afghanistan. Bush intends to request this money in a supplemental
appropriation bill after the November election. Based on last
year's $87 billion supplemental appropriation, it is likely that
total military spending will be in excess of $500 billion, or
more than 4 percent of GDP, for the foreseeable future.
Remarkably, this increase in the military
budget has been accomplished with virtually no debate. In the
last years of the Clinton administration, military spending fell
to 3 percent of GDP While some hawks demanded a substantially
higher military budget, this was a minority position in both political
parties. Now it seems likely that the country will be spending
4 percent of GDP on the military regardless of the outcome of
the 2004 election. In fact, if the $40 billion in proposed spending
on homeland security is included, total spending on defense in
2005, is likely to be close to 5 percent of GDP.
Military spending is almost the only category
that will see a substantial increase in the Bush budget. The 3
percent proposed increase in education spending is just about
enough to maintain current service levels- after taking account
of inflation and a growing school population-but far too little
to cover the costs of the mandates in the No Child Left Behind
Most other categories will see cuts or
increases that are too small to maintain current service levels.
The budget proposes that appropriations for the broad non-defense
discretionary category, which includes almost everything except
Social Security, Medicare and Medicaid, are to be increased by
just 0..5 percent above the 2004 levels. Given that an increase
of about 3 percent is needed to maintain current levels, most
government programs will have to be cut back.
What will this mean? For example, it means
that fewer low-income families will get subsidized childcare and
fewer children will be in Head Start. Cutbacks to a wide variety
of state programs will be needed. While the impact of the 2005
cuts may not be that large, the budget proposes continued cuts
over its five-year planning horizon, so that in many programs
real service levels will be reduced by more than 10 percent.
To lock in such cuts, Bush is proposing
new rules that would require super-majorities to increase spending
beyond these targeted levels without offsetting cuts in other
areas of spending. There is no comparable restriction on tax cuts,
The budget contains several other tricks,
in addition to the exclusion of war-related spending. Adjusting
for these tricks adds $100 to $200 billion to the annual deficits
projected in Bush's budget. While the current deficit is not
a problem, in the context of continued economic weakness, the
government cannot run deficits of 4 percent to 5 percent of GDP
indefinitely. In the not very distant future, it will be necessary
to institute substantial tax increases
To see how out of line the tax situation
has become, it is worth putting aside the designated revenue streams,
such as Social Security and Medicare taxes, and federal workers'
contributions for their retirement. The taxes that support general
expenditures (primarily individual and corporate income taxes)
are projected to equal 9 percent of GDP in 2005.
By contrast, the programs that are supposed
to be supported by general revenue equal more than 14 percent
of GDP. In other words, income taxes would have to be increased
by more than half in order to cover these expenses. Of course
some borrowing is fine, but income taxes would still have to rise
by at least 25 percent to reach a sustainable budget.
Obviously, Republicans will fight any
tax increases vigorously, but there is not very much to cut from
the budget after the military and interest payments are pulled
out. There will be many Republicans, and probably also many Democrats,
who will look to make cuts to Social Security and Medicare to
help bring deficits down to size. Since these programs are financed
by separate taxes-which by all accounts leave them well-funded
for several decades into the future-there is no reason that they
should be on the chopping block. But truth in budgeting does not
seem to be a concern of either party at present.
Dean Baker is co-director of the Center
for Economic and Policy Research in Washington, D.C.
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