Robert Samuelson has written another of his typical broadsides on entitlement spending.
Here's a large excerpt from Samuelson's column:
For those who believe our leading politicians are utterly shameless, there was dreary confirmation last week. President Bush publicly bragged about the federal budget. Here's the objective situation that inspired the president's self-congratulation: With the unemployment rate at 4.6 percent (close to "full employment" by anyone's definition), the White House and Congress still can't balance the budget. For fiscal 2006, which ends in September, the administration projects a $296 billion deficit; for fiscal 2007, the estimate is $339 billion. How could anyone boast about that?
Easy. In February the administration projected a $423 billion deficit for 2006, so the latest figure is a huge drop. A skeptic might say that the first estimate was inept; some cynics argue that it was deliberately exaggerated to magnify any subsequent improvement. Naturally the president had a different story. The shrinking deficits, he said, proved that his tax cuts are working. The economy is great; the budget benefits. All around Washington, Republicans staged media events to hug themselves for their good work.
The tendency for politicians to claim credit for favorable news is as natural as flatulence in cows. Still, the Republicans' orgy of self-approval amounts to a campaign of public disinformation. It obscures our true budget predicament. Let's go back to basics. Here are two essential points.
First, budget deficits are not automatically an economic calamity. Their effects depend on their timing, their size and other economic conditions. During recessions, deficits may prop up the economy. In a boom, they may drain money from productive investments. Similarly, deficits are only one influence on interest rates; others include inflation, the demand to borrow, the supply of savings and Federal Reserve policy. At present the effect of deficits is modest; otherwise, rates would be higher than they are (about 5 percent on 10-year Treasury bonds).
What truly matters is government spending. If it rises, then future taxes or deficits must follow. There's no escaping that logic. The spending that dominates the budget is for retirees. Social Security, Medicare (health insurance for those 65 and over) and Medicaid (partial insurance for nursing homes) already exceed 40 percent of federal spending. As baby boomers retire, these costs will explode. Unless they're curbed, they'll require tax increases of 30 percent to 50 percent over the next 25 years.
Second, the budget should be balanced -- or run a surplus -- when the economy is close to "full employment," as it is now. Balancing the budget forces politicians to make uncomfortable choices. Which programs are sufficiently needed or popular to justify unpleasant taxes? Balancing the budget also lightens the debt burden. One figure Bush doesn't praise is the annual interest payment on the growing federal debt. Even by White House estimates, it will rise from $184 billion in 2005 to $302 billion in 2011.
Some conservatives rationalize their indifference to deficits as "starving the beast." If you cut taxes and create deficits, government will spend less because it has less -- much like a teenager whose allowance is cut. But the theory doesn't fit the facts. Economist William Niskanen of the Cato Institute, who worked in the Reagan administration, examined the relationship between deficits and federal spending from 1981 to 2005. He found that, contrary to the theory, spending rises when deficits rise. Deficits are what they seem: a way for politicians to escape inconvenient choices.
The rest of Samuelson's column criticizes the Democrats, although it does so less plausibly, if you ask me. It's not that Democrats are immune to criticism on matters involving the federal budget, but they have shown themselves to be willing to raise taxes in order to balance the budget. And that willingness has always expressed itself in the form of progressive taxation, which is wildly contrary to Republican ideas about taxation.
Furthermore, as I recall, the bond market and the stock market reacted favorably to Clinton's fiscal policies — which the Republicans opposed, I might add — and that favorable reaction contributed to the economic climate that produced the surpluses that Bush inherited. Consequently, it seems fair to me to say that the Democrats and their policies were at least partly responsible for the vanished surpluses.