More Budget & Tax Lies

The "balanced" federal budget which Congress passed and the President just signed is anything but balanced. Once again, the double-speak that passes for policy has won the day with both parties lying each time they tried to explain how marvelous this effort at bipartisan cooperation is. The only portion of the entire affair which could be described as bipartisan, though, was the efforts of both parties to refuse to make the hard choices on Social Security, Medicare and Medicaid while giving a tax cut at the worst possible time economically. Let's look at a few pieces and then contemplate the phantoms of reality that they are using to produce policy.

The next three years will see the budget deficit grow at a rate of between $60 billion to $90 billion a year. This happens simply because the budget included both increases in spending on some items while reducing federal income through the tax cuts. Twelve years of Reagonomics should have taught anyone watching that these "Supply-Side" fantasies have never worked, they have only increased the deficit every single year that they have been employed. It is impossible to tax less and spend more and have a balanced budget. If these nincompoops would ever stop trying to trick the American taxpayer with the lie of "Supply-Side" economics, there is a faint chance that the budget might be balanced. Don't hold your breath.

As for the tax cuts, nearly every independent economist (read not bought and paid for by politicians) agrees that this is a terrible time to increase the money supply through legislation. With unemployment hovering near 5%, the stock market up 27% in 1997 and inflation barely a blip on the screen, the American economy is doing exactly what economists think it should. Add more purchasing dollars into the equation and you end up with more money chasing the same amount of goods and that always equals higher inflation. Combine that with the capital gains tax cut, a very poor idea at any time, and you create the danger of a huge selling pressure each time the market adjusts downward.

Entitlement spending, a massive portion of any federal budget, was once again tinkered with. Another year has now passed where the responsibility for reorganizing the costs of these programs has been passed to later budgets and newer taxpayers. The Senate's budget included two packages which would have been extremely useful in containing these runaway expenditures: a gradual rise in the age of eligibility from 65 to 67 and higher premiums for the wealthy. Both, of course, disappeared from the final bill. Medicare, in particular, is a transfer of money from the poorer young to the wealthier old. Social Security will soon become the same when it begins taking more Social Security taxes from fewer workers to support the retired many. Both programs, however, are provided to the elderly, a group who votes at a far higher rate than the young. Also, these elderly tend to be much more secure financially and much more willing to give that money to politician's campaigns. End of that story, huh?!?

This budget, rather than begin the complex task of repairing Medicare, in particular, just cuts funding for doctor and hospital reimbursement. This extremely minor adjustment only slows the expanding costs of the program by $115 billion dollars over the next 4 years, a minuscule 9% overall of the $1.3 trillion dollar projected increases during the same time period. This is described by Congress and the President, though, as "savings".

Finally, all of the rosy future projections in both spending and income are predicated on another nearly impossible economic scenario. Even a slight downturn in the economy, let alone a full blown recession, would destroy any possibilities for future budgets to come anywhere near a balance. The entire desire of both this Congress and the President is the same as the last three budgets; pass the problem on to later budget planners while providing tax gifts to those who need them least now. This insures the loyalty of your contributors and great press from the media who only report what they are told. Tell a reporter that the sky is green and it will be reported exactly that way since the act of checking a fact is no longer a skill the media possesses.

Again we are witnessing show business, not politics. You are being given whatever it takes to shut you up long enough for the politicians to get what they can while you think you are better off. The time is not that far off when Social Security, Medicare and Medicaid will be filed under "Historical Oddities; Dead Programs Which Once Benefited All" and the term Balanced Budget will be found under "Comedy Sketches Which Failed".

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Copyright 8/21/97