The budget adrift
IF, as you float along on your rubber raft through the rest of August, you feel you need a serious issue to mull over, consider the federal budget deficit. The bipartisan Congressional Budget Office forecast last week that without changes in spending policy, the deficit would rise from $157 billion in this fiscal year to $183 billion next year and to $192 billion the year after.
The White House had earlier projected a very similar figure for the current year deficit, but was more optimistic - to the tune of $161 billion and $166 billion, respectively - for the next couple of years.
Some sort of Gramm-Rudman deficit reduction action may be forthcoming, but it is likely to be done mostly with accounting smoke and mirrors. ``Automatic cuts'' are all too likely to be reversed by Congress at the first opportunity.
Earlier in the 1980s Congress and the administration did make some progress in working on the deficit. But of late, both sides have been hardening their positions: the President adamant against tax increases and defense cuts, Congress adamant against domestic spending cuts, and in fact, even talking about new spending.
Indeed, the electorate as a whole has shifted a little leftward on government spending, at the state and local as well as federal level: Witness the new initiatives in education and health insurance. State taxes are back up to their pre-``Proposition 13'' levels. And it is telling that in many cases where federal funding has been withdrawn, the states have replaced the money with their own funds rather than eliminate the program at issue.
So where are we? It's tempting to call the situation hopeless, but not serious. Fortunately, for some years now international capitalists have come to the rescue, financing the deficit by investing in the United States, and at fairly modest interest rates, too. The economic expansion continues, subject to blips up and down, such as the inflation and gross national product figures released Friday. The stock market roars along.
So the Cassandras and the Chicken Littles out there don't enjoy great credibility at the moment. Still, the United States is living beyond its means, without much of a safety net. Diversionary tactics such as pleading for a balanced-budget amendment, or some other form of budget-process reform, cannot hide Washington's - the public's - unwillingness to balance income and outgo.
Of course, those who remember their Economics 101 will recall that deficit spending by the central government can helpfully stimulate the economy at times, and so should not be outlawed, by constitutional amendment or otherwise. Still, the US is far beyond whatever level of deficit spending might be optimal.
The US is, at this point, basically like a family that lives from month to month with no savings and just about at the limit on its credit cards.
The minimum monthly payments get made all right, and indeed, the bank has just sent a congratulatory note saying that the limits on said cards have just been raised another $1,000. But the debt is piling up, and the kids are going to need college funds before their parents have their Weeboks fully paid for.
Some of the despair from the budget-watchers may be largely pro forma. Like the proverbial bumblebee, the system still buzzes along in defiance of all those who insist it can't remain airborne.