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FEBRUARY 2, 2004
Put Away The Wallet, Mr. Bush There are times when running a federal budget deficit is the right thing to do. Under President George W. Bush, the government sharply increased spending for the war in Iraq and homeland security. At a time when the economy was struggling to recover from the 2001 recession, trying to cover those emergency costs by raising taxes would have been pure folly. Instead, Bush pushed through deep cuts in income taxes, which revived economic growth by giving consumers increased spending power. That was the appropriate solution for the economy, even though it left the government with a deficit that could amount to nearly half a trillion dollars in the current fiscal year. Now, though, the economy is growing again, so the time has come for the U.S. to get its house in good financial order. That means the President must take steps toward balancing the budget to avoid an economic stall. Unfortunately, there are signs that he still hasn't made fiscal restraint a priority. In his State of the Union address on Jan. 20, Bush called on Congress to make the tax cuts enacted over the past three years permanent. While the cuts provided a valuable stimulus to the economy and smart incentives for investment, locking all of them in place indefinitely with no opportunity for trimming would make it difficult -- if not impossible -- to balance the overall budget. Another budget-buster is the President's proposal to divert a portion of Social Security taxes into personal savings accounts. The diversion would leave less tax money to pay current recipients of Social Security checks. If Bush doesn't want to default on obligations to today's seniors, he or his successors will have no choice but to siphon money from other government programs -- or borrow massive sums to keep the pay-as-you-go system from collapsing. A President with so many ideas for cutting taxes has an obligation to propose equal or greater cuts in spending. He hasn't. Bush has never vetoed a spending bill. In his State of the Union address, he moved to revive the narrowly defeated energy bill, which was chock-full of subsidies for producers of oil, natural gas, coal, nuclear power, and -- the favorite of agribusiness -- the gasoline additive ethanol. Although he didn't mention it in his speech, Bush has also floated the costly idea of establishing a lunar colony, with eventual manned trips to Mars. And last year, he asked for and got an expensive Medicare prescription-drug benefit -- without demanding cost-saving reforms in the structure of Medicare. Bush's free-spending ways have outraged conservatives in his own party. Yet Democrats are hardly blameless. They are traditionally quick to fix the budget deficit with higher taxes but slow to make politically difficult cuts in spending. President Bush has a chance to reassert the GOP's role as the party of fiscal responsibility on Feb. 2, when he proposes a budget for the fiscal year beginning in October. We hope he will seize the opportunity.  Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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