Will Bush employ old 'tricks' in new budget?

President Bush's second budget is unlikely to contain any big surprises when it comes out today.

The White House already has fed the press with its key points. For instance, the budget will show a deficit of about $80 billion for fiscal 2003, which starts next October. It will also include a $48 billion hike in defense spending and an extra $37.7 billion for homeland security.

What some budget experts in Washington will be looking for is whether the accounting scandal at Enron Corp. has prompted the administration to make this year's budget somewhat more straightforward than last year's plan.

Democrats already have begun to seize on accounting issues. "I don't see too much difference between this kind of presentation and consideration of budget responsibilities and Arthur D. Andersen," Enron's accountant, Sen. Ernest Hollings (D) of South Carolina said at a Senate Budget Committee hearing last week.

"Every administration spins on budget and tax issues and presents them to its own advantage," says Robert Greenstein, director of the Center on Budget and Policy Priorities in Washington. "But this administration stretches and spins the truth further than either party in the past 30 years."

Mr. Greenstein's main complaint relates to the accounting "liberties" taken by the Bush administration in last year's budget. That plan projected a $5.6 trillion surplus in the 10 years from 2002 to 2011. The nation, Bush officials held, could enjoy a $1.6 trillion tax cut, set aside $2.6 trillion of Social Security surpluses, reduce the national debt by $2 trillion, and still have $1.4 trillion left over for Medicare reform and other needs.

Well, that hasn't panned out.

The Congressional Budget Office (CBO) reported late last month that $4 trillion of the surplus has disappeared. That leaves a $1.6 trillion surplus.

Despite Enron, Greenstein says he has "no reason" to believe this year's budget will employ more honest accounting.

Robert McIntyre, director of Citizens for Tax Justice, another Washington research group, also sees "no evidence" of reform. "One of the reasons we have gotten into this [budget deficit] fix is that they [Bush budget officials] made silly projections last year on the surplus. It fooled people who shouldn't be fooled," he says.

Federal Reserve Chairman Alan Greenspan and some Democrats bought into the surplus estimates, and Congress passed the tax cut in June.

Republicans blame the vanishing surplus mostly on the recession and on costs associated with Sept. 11.

The economic slump does account for most of the deterioration in the budget surplus this year and next year. But over the next 10 years, the tax cut is the biggest item. The CBO reckons it accounts for $1.7 trillion of the missing $4 trillion, if the interest on the extra federal debt created by lost revenues is included.

Greenstein expects many of last year's accounting "gimmicks" to be used again in this year's budget.

Last year's budget, for instance, provided no relief for taxpayers subject to the Alternative Minimum Tax. Some 1 million taxpayers are hit by this provision today. By the end of this decade, 35 million will pay the extra tax burden. For political reasons, Congress will ease that burden at some point.

The budget also did not extend an array of expiring tax provisions that are routinely renewed, such as the research and experimentation tax credit.

Added up, these and other budget "tricks" mean that another $1 trillion should be subtracted from the 10-year surplus, Greenstein calculates.

"If Enron makes people upset, they should be really upset about how the government keeps its books," says Andy Davis, spokesman for Senator Hollings.

White House budget director Mitchell Daniels Jr. counters that 10-year budget projections aren't of much value, that budget numbers "oscillate wildly."

Many budget experts would agree. But last year, Mr. Daniel's office used the 10-year surplus numbers in arguing for a tax cut.

Enron has given Democrats another stick to beat the Bush tax cut. At that bankrupt Houston-based company, executives made $1 billion by selling inflated Enron stock. Employees, unable to sell Enron stock in their retirement 401(k) plans, lost out badly.

Similarly, Democrats say, the remaining Bush tax cuts slated for 2004, 2006, and later benefit mostly the rich. The cost of these tax cuts about equals the shortfall in Social Security funding over the next 75 years, notes Greenstein.

So, tax cuts for the rich put at risk Social Security pensions of most Americans, Democrats say.

Massachusetts Sen. Edward Kennedy (D) proposes forgoing $280 billion of tax cuts that benefit those in the top three income-tax brackets, and dropping the scheduled repeal of the estate tax.

Some 97.5 percent of all taxpayers wouldn't be touched by the Kennedy bill, Mr. McIntyre calculates. But Bush promises a veto of any such plan, calling it a tax hike, though no rates would actually rise from their present levels.

Enron may make such a veto more politically uncomfortable.

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