Botching the Budget
In the political crucible of Washington, it is not unprecedented that a $1-trillion budget has been hung up by bickering over the $6 billion that it would cost to give Social Security recipients a $14-a-month cost-of-living increase next year. When members of the House and Senate budget negotiating team glance out the windows of the Capitol, they tend to see only as far as the 1986 elections.
If they looked further, they would see that even if they achieve a projected $56 billion in budget savings this year the national debt will grow by roughly $500 billion between now and 1988.
They would discover that the trade deficit has escalated to the point that the United States now is a net debtor nation for the first time since 1914. Lured by high U.S. interest rates, foreign investments are financing our domestic debt at a pace that cannot be maintained.
They would see other danger signals on the horizon. The 1986 budget assumes that the economy will grow by about 4%. But expansion amounted to only 2.2% over the past three quarters. Barring a dramatic and unexpected spurt, the $56-billion deficit reduction already is a mirage.
Now Congress has before it a tax-reform plan that, rather than being revenue-neutral, most likely would result in less tax revenue than the present system. That would amount to another tax cut, and add further to the debt. The Administration has not exactly abandoned its rhetoric that the country can blissfully grow itself out of the deficit. It has merely shifted to the illusion that the economic stimulus of tax reform will do it.
The one bit of good news is that the collapsed budget negotiations are being revived and a compromise may be crafted that preserves the Social Security raises and saves political face for House and Senate members. That would be a constructive step, but not the end of the process.
It should rather be the starting point for a sober look at the entire budget / tax tangle in the context of the troubled economy. What has happened to national priorities, for instance, when we consider denying needy senior citizens $14 a month in Social Security while contemplating more tax breaks for the wealthy or for corporations? How can we promote massive tax changes in a vacuum without assessing their effect on the budget process and the obvious need for more revenue, not less?
The joy ride of defense spending, tax reductions and budget deficits--providing selective prosperity for some Americans--must come to an end. So, too, must the notion that a few domestic programs can be saddled with the blame and picked on for minimal savings. Americans need a good dose of realism about the dangers of our national credit-card spending spree and the damage that it can cause to the total economy. They need to be told that the only way to avoid a slide into economic quicksand is a tax increase now.