Rather than compromise with the Dems, the GOP is buying everyone off. As the '04 elections approach, Washington is running up a huge IOU to pay for goodies for campaign contributors and local constituents. That tab will have to be paid -- and unless the White House and Congress get a grip, America's children and grandchildren will get stuck with it.
Federal profligacy stands in marked contrast to the discipline being exhibited by states and localities where the worst fiscal crisis in 50 years is ending. In California, revenue collections exceeded forecasts by $514 million for the first quarter of its fiscal year. Some 21 states are in California's position. A year ago, the aggregate state budget gap was $17.5 billion. Today, it is $2.8 billion and closing fast. How did the states do it? Spending cuts, higher taxes, and lower jobless-benefit payments. The strong economic recovery and a rebound in stocks is generating bigger tax revenues, too.
There has been no such discipline at the federal level. The Congressional Budget Office estimates that the Medicare bill will cost $400 billion in its first 10 years -- but up to $2 trillion in its second decade as baby boomers retire. The proposed energy bill will also cost more than twice as much as advertised by Congress thanks to "sunset" provisions for tax cuts that will probably never set.
Undoubtedly, faster economic growth will generate more tax revenues and cut the federal budget deficit. The recovery is already helping the states. But growth alone cannot stop the river of red ink roaring out of Washington. There are no supply-side tricks, no productivity surprises -- no deus ex machina -- that can save future generations from this fiscal folly. Only a return to principle will do that.