| Number 250 | April 2, 2004 |
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This Week:
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Greetings, This week is the final week of my series on the federal budget proposed by George W. Bush, the “President” of the United States. (I always place his name in parentheses, since he was not actually elected to the office.) I’ve been talking, so far, about the content of the budget, as in: “What got cut?” and “By how much?” The more interesting and, I think, ultimately more important part of the Bush program is the attempt to change the rules of the budget process itself, which is what I talk about this week. This part of the Bush program seeks structural changes that are intended to make it permanently more difficult for the popular will to be expressed through democratic processes. Some of this effort has been reported in the media, but virtually always in a piecemeal fashion that fails to convey the systematic nature of this threat to democratic decision-making at the federal level. The issue of the Notes that you have in front of you attempts to address this very interesting and under-reported aspect of the Bush administration’s power grab. I confess that I try to steer away from “Quotes” of the Week that have to do with the ongoing U.S. occupation of Iraq, for the simple reason that the level of silliness, doublespeak, and downright lying coming out of that quagmire is so high that it’s too hard to choose the silliest. Still, when someone like this week’s Dan Senor utters something that appears to be straight out of the Orwell textbook, I just can’t ignore it. Forgive me. Next week: The Nygaard Notes Pledge Drive! Have your checkbooks handy!! Nygaard |
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On March 29th, the New York Times (“All The News That’s Fit To Print”) ran a story with the headline: “G.I.’s Padlock Baghdad Paper Critical of U.S.” In it, we read that “American soldiers shut down a popular Baghdad newspaper on Sunday and tightened chains across the door...” On March 30, the Times quoted Dan Senor, “spokesman for the occupation authorities,” commenting on this shutdown of the newspaper (which “was a tough decision to make”, he said): “We believe in freedom of the press.” |
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The Center on Budget and Policy Priorities (CBPP) points out in its February 20th report “Analysis of the President's Budget,” that “The Administration proposes new budget rules that would impose fiscal discipline on entitlement programs for middle- and low-income families but impose no discipline on new tax breaks for high-income families and corporations.” Let me explain how this works. One of the reasons we had federal budget surpluses during the 1990s—besides the expanding economy, a very large reason—was the existence of a rule in the budgeting process called the “Pay-As-You-Go” rule, which insiders call PayGo. PayGo is based on a simple idea: When you (or the government) make a plan to increase your spending in one area, you have to also have a plan to either increase your income by the same amount OR to decrease your spending in a different area by the same amount. And, likewise, if you make a plan to reduce your income, you also have to have a plan to reduce your spending by that same amount. In other words, you have to have a plan to “pay” for things “as you go,” so as not to increase your debt. In bureaucratic language, this requirement of “paying-as-you-go” is known as “offsetting.” An “offset” is either the thing that increases your income to pay for new spending, or the thing that decreases your spending to make up for decreased income. Simple enough, right? That’s how the rules for the federal budget have worked since 1990, when Bush I signed into law the Budget Enforcement Act. But Bush II has proposed something entirely different. Under the Bush II plan: * Entitlement [i.e., spending] increases would have to be offset. As the watchdog group OMB Watch puts it, “Under the President’s proposal, legislators could not expand a program like prescription drug benefits under Medicare, for instance, and pay for it by eliminating a corporate tax loophole—rather, it would have to be paid for by cutting something from the entitlement side.” Medicaid spending, for instance, or welfare, or Title I education funds. Or, theoretically, military spending. * The costs of refundable tax credits — i.e., tax credits for low- and many moderate-income working families like the Earned Income Tax Credit (EITC) or the child care tax credit — also would have to be offset. Again, this would almost certainly be done by cutting other spending that benefits the majority of United Statesians, since military spending is not going to be cut in the current environment. * But the costs of other tax cuts — including the large savings tax breaks in the budget, which would represent a bonanza for the wealthiest individuals in the country — would not have to be offset. * Furthermore, the only offsets that could be used to pay for entitlement improvements would be cuts in other entitlement programs. Savings on the tax side — such as from closing abusive corporate tax shelters or other tax-avoidance scams — could not be used to finance entitlement benefit improvements. CBPP uses a basic class analysis to put these rule changes in context:
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In addition to the major change in “offset” budget rules explained above, the “President” has proposed a number of other changes in the rules that “would vest more power in the executive branch,” in the words of OMB Watch. In addition to being contrary to the “small-government” rhetoric of the party of the current resident of the White House, this attempt would not only concentrate more power in the current President, but also threatens to change the basic power relations in the budgeting process for a long time to come. It’s worth knowing about. One change is the imposition of “caps,” or statutory limits, on discretionary spending. “The caps the Administration has proposed are very tight and would necessitate deep cuts in domestic discretionary programs,” according to one analyst, but the real problem lies in how the administration proposes to enforce these tight caps. As the Center on Budget and Policy Priorities puts it:
Since the president would set the original caps, such a tight-caps-plus-sequestration rule would mean extraordinary new powers for the president. The second change is a little bit complicated. Having worked as a bookkeeper for some years, I understand the basics of putting together a budget, as well as the financial projections that accompany it, so I think I can explain it. Typically, a bookkeeper projects several months or years into the future to say what the revenues and spending will be, assuming there are no changes in policy. This is known as the “baseline.” Once an organization, or government, has this basic information, not only can people see where current policies are taking them (into the red or into the black?), but they can also plug in the costs of new spending, or the revenues expected to be raised by other new policies, and see how those new things will change the bottom line. This is pretty basic stuff (for bookkeepers anyway). What the Bush folks have proposed is a change in the baseline for calculating future federal revenues. Not to get too technical, the Bush-ites basically have proposed that the Congressional Budget Office (the government’s “bookkeeper”) do two new things: 1) not adjust the baseline for inflation, and 2) include the 2001 and 2003 tax cuts as if they were permanent (which they, so far, are not). “These changes are primarily designed,” says OMB Watch in a recent article, “to hide reductions in spending and to make the cost of tax cuts appear to be zero,” with the result that the 2005 Bush budget document is “fundamentally misleading.” And it gives more power to the current president and any future one who has tax cutting as a top priority. More Rule Changes, A Laundry List There are several more rule changes in the Bush plan, and they’re all sort of complicated, so I’ll just very briefly mention three more of them here, for the record. (For those who are interested in the details, next week I will give some useful websites to visit.) The administration also proposes: * making the requirements for “emergency” spending (which is not counted under the budget caps) stricter. “Emergency” spending must be necessary, sudden, urgent, unforeseen and not permanent. To understand this change, think of this president, then imagine which is the more important “emergency” for which he might request funding: Health insurance for the 43 million US’ers who lack it? Or sending some troops to Venezuela, or Cuba, or Uzbekhistan? The point here is: more power to the president. * allowing a presidential line-item veto, giving the president the authority to veto new appropriations, mandatory spending, or ‘limited grants of tax assistance’ whenever he determines that the spending is not an “essential government priority.” More power to the president. * making a “continuing resolution” automatic when appropriations are not enacted by the start of a new fiscal year (a common occurrence), by funding at the level of the president’s budget or the prior fiscal year—whichever is lower. Again, if the Congress takes no action, that means that the president’s plan goes into effect. More power to the president. |
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Let me take a moment to debunk a rather basic bit of propaganda in regard to the federal budget that continues to come from the Bush administration and others of their ilk. The director of the White House Office of Management and Budget, Josh Bolton, stated it succinctly: “We want to keep the focus on spending and that’s where we think the [deficit] problem is.” This is the standard line: deficits are caused by “out-of-control government spending.” Here is CBPP on this subject: “[S]pending in 2004, at 20.2 percent of Gross Domestic Product [the most meaningful measure] according to the Administration (and 20.0 percent according to Congressional Budget Office), will not be unusually high; it will be lower than in any year from 1980 through 1996 and slightly below its average level of 20.5 percent of GDP over the past 40 years. “In 2004, revenues [that is, taxes] will total 15.7 percent of GDP according to the Administration and 15.8 percent according to CBO, the lowest level since 1950. “CBO and OMB data show, in fact, that declines in revenues [i.e. less tax income] account for about three-fourths (76 percent) of the fiscal deterioration of the past few years.” In other words, we have deficits mostly because of tax cuts, not because of high spending. |
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Here’s some late-breaking news on the rule changes: The reason I explained a little bit about supply-side economics last week is that it helps you understand the news. One of the things I said was “Supply-siders want to reduce taxes on the owners of capital, sometimes known as ‘the wealthy,’ since they will then attempt to make more money by investing in productive activities that will make the economy grow.” What I didn’t say was that this philosophy also holds that the government will actually take in MORE tax money after it cuts taxes, because when the economy grows, people pay more taxes. It’s hard to find evidence to support this, but... Just this past Wednesday (March 31), I’ll be darned if I didn’t see this philosophy stated with textbook clarity in the New York Times, in an article reporting on an unsuccessful effort in the House of Representatives to prevent the very rule change outlined above (the one that would allow unlimited tax-cutting with no offsets). Here’s what I read:
These are the people in charge of the country right now. |