Monday, October 1, 2007

Milwaukee Journal: perscribes wrong deficit reduction medicine

A Milwaukee Journal editorial recently opined that "A Republican Congress abandoned its principles and left the country ill-prepared to meet long-term obligations." "Fiscal discipline is needed" it concluded.

The piece criticised the $190 billion 2002 Farm Bill, 70% of which went to the richest 10% of farmers. It also targeted the new Medicare prescription drug benefit.

Both could charitably be described as socialism for the rich-U.S. agribusiness, insurance and pharmaceuticals companies!

While they are poorly designed public policy, neither is at the heart of the deficit problem.

By failing to identify how the Bush administration has squandered a projected $5.2 trillion surplus, the Journal is fueling the erroneous perception that out of control social spending and entitlements are to blame.

Nothing could be further from the truth

The two main causes of the Bush era deficits are its high end tax cuts and the War in Iraq.

Congressional Budget Office data show that Bush's tax cuts have been the single largest contributor to the reemergence of substantial budget deficits. Legislation enacted since 2001 has added almost $2.3 trillion to deficits between 2001 and 2006, with half of the deterioration in the budget due to the tax cuts (about a third was due to increases in security spending, and only a sixth to increases in domestic spending).

56.5% of these tax cuts went to the richest 10% of wage earners, those averaging $256,000. Only 14.7% went to the bottom 60% who average $44,000.

Unlike in previous wars, the United States has cut taxes at the same time it has increased military spending."It's fair to say all of the money spent on the war has been borrowed," says Richard Kogan, a senior fellow at the Center on Budget and Policy Priorities, a think tank in Washington. "But eventually everything has to be paid for."

And the bill is growing!

Just last week President Bush requested an additional $42.3 billion in “emergency” funding for Iraq and Afghanistan. If passed, the 2008 war bill will be almost $190 billion, the same as the 10 year Farm Bill increase the Journal singled out for criticism and the largest single-year total for these wars. It is an increase of 15 percent from 2007.

It will bring the year end total for the Iraq and Afghanistan wars since Sept. 11, 2001 to $800 billion, still less than half the $2 trillion total projected cost.

As Illinois Senator Everett Dirksen once said about the Defense budget, "a billion here, a billion there, pretty soon you're talking about real money"-money that could buy a lot of healthcare, infrastructure, early childhood education or deficit reduction!

What it hasn't bought is protective equipment for our soldiers and their vehicles, the capture of Osama Bin Laden or adequate medical care for our vets!

And remember this $42 billion military increase is off-the-books, "emergency" funding, an addition to the original 2008 spending request, made before the President announced his so-called “new strategy” of partial withdrawal.

Iraq alone has cost the United States more in inflation-adjusted dollars than the Gulf War and the Korean War and will soon pass the Vietnam War.

This for a war that former Defense Secretary Donald Rumsfeld promised would cost under $50 billion while his deputy, Paul Wolfowitz, predicted Iraqi oil revenues would largely pay for Iraq’s reconstruction.

The $42 billion emergency funding increase is more than the bipartisan, fully funded $35 billion expansion of the State Children’s Health Insurance Program (SCHIP) that President Bush has promised to veto.

Since Iraq costs the country $333 million a day, we can't afford to expand SCHIP which costs $19 million a day!

The $42 billion is also almost twice as much as the $23 billion in improvements for waterways and water systems in every state that Bush is threatening to veto as too costly.

Mr Bush took office in 2001, the last time the Government produced a budget surplus. Every year after that the Government has been in the red. In 2004 the deficit swelled to a record $US413 billion ($494 billion).

The Journal is right when it suggests that Mr Bush is mortgaging the country's future. But it is wrong to suggest that entitlements and social spending are to blame.

High end tax cuts and Mr Bush's war of choice in Iraq are the real culprits!

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