Budget tight, deficit high

Discretionary spending "is a tiny fraction of the budget. You could eliminate the whole thing ... and you would barely cover the size of [Bush's] tax cuts," said William Gale, a Brookings Institution budget analyst, at a seminar on the Bush agenda last week.

For this and other reasons, wrangling over red ink seems sure to be a feature of legislative life this year. After all, the nation's deficit will hit $427 billion in fiscal year 2005, after the administration's expected $80 billion supplemental request for military operations spending is added on. In dollar terms, that's a record - though as a percentage of the nation's economy it is still smaller than the explosive deficits of the Reagan years.

Bush has vowed to cut the deficit in half by 2009, and his new budget would do that, if the measure used is the deficit's percentage of GDP, say administration officials.

The 2005 deficit will be about 3.5 percent of GDP. Under the just-released plan, the 2009 deficit would be 1.5 percent of GDP, well below the 40-year historical average of 2.3 percent.

Critics contend that the Bush plan is carefully crafted to hit the five-year promise, however, and that the deficit would resume increasing sharply in 2010.

The president's two biggest domestic fiscal proposals - making his tax cuts permanent, and introducing private accounts within Social Security, would both kick in after 2009, noted Mr. Gale. Thus promising to halve the deficit prior to then "is like saying you're going to go on a diet until dinner," he said.

Overall, perhaps the most noteworthy aspect of the current state of politics over fiscal issues is that the traditional GOP position of fiscal responsibility appears to have been abandoned, claims Stan Collender, general manager of the Washington office of Financial Dynamics Business Communications.

Absolute numbers are less important than the trend, writes Mr. Collender in a recent National Journal column - the federal bottom line has deteriorated every year for the past four years.

The fact that the administration points out that deficits were much larger as a percentage of the economy under Ronald Reagan is telling, claims Collender. That's using the budget failure of one Republican to make that of another seem smaller.

"Republicans have become the political party of both big deficits and deficit increases," he writes.

Administration officials, for their part, retort that outside events, such as the terrorist attacks of Sept. 11, 2001, have played a large role in recent deficit creation. An economy that was less robust than predicted in the early years of Bush's term in office did not help.

Furthermore, Bush has only a limited ability to change the situation, given the tightness with which Congress holds the nation's purse strings.

Some influential conservatives, such as Grover Norquist of Americans for Tax Reform, readily admit their disinterest in deficits, saying keeping taxes low is more important.

The 10-year cost of making Bush's tax cuts permanent would be $1.29 trillion, according to the just-released budget.

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