Can We Afford All This?

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PHOTO ILLUSTRATION BY CLARK MITCHELL

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And what about that 27% increase in discretionary spending in the past two years? Not all of it has gone to support the wars in Afghanistan and Iraq, although it was the $87 billion additional cost of those ventures that gave voters momentary sticker shock earlier this year. In May 2002, a $183 billion farm bill propped up corn and peanut growers whom Congress had once promised to wean off the federal dollar. This year veterans' benefits were upped by $22 billion, and $50 billion was added in Medicare fees for doctors. What made much of this possible is that the budget edict requiring all new tax cuts or spending increases to be offset by equivalent tax increases or benefit reductions was allowed to lapse last year.

Pork, never out of fashion, is back in double measure. Besides those mohair subsidies, money is being spent to study exotic pet diseases in California, and, says Republican Senator John McCain, who has made a career of railing against such expenditures, "$1 million will go for grasshopper and Mormon cricket activities in Utah." And there is more being brought to the checkout counter. A major energy bill has yet to pass, but to get over each hurdle, new money was added to buy votes. The bill being debated is now at $31 billion, three times the size the President requested. And this month Congress is scheduled to take up another pork magnet, the lumbering $328 billion appropriations bill that combines seven different funding measures to finance 11 of the 15 Cabinet departments and several agencies.

President Bush has already passed tax cuts that will cost $1.7 trillion over 10 years, and that means there's less money coming into federal coffers in the short term. That has contributed to a debt that this year reached $6.9 trillion. And more tax cuts may be on the way. In coming years, tax breaks for married couples and children that are on track to disappear are almost certain to be sustained, and some kind of costly fix is likely for the alternative minimum tax, which is hitting a disproportionate share of the middle class. While many number crunchers understand that war and a soft economy make deficits a necessity, they worry that the spending frenzy will not end once those extraordinary conditions abate. Not only are items being locked into the budget that will be hard to cut later, but beating back check-writing fever also takes time, which means an inevitable delay in focusing on the deteriorating fiscal condition of entitlements like Medicare and Social Security. Traditional dangers associated with high deficits have yet to appear — interest rates are still near record lows — but analysts are worried that the situation will change and that they will see a depressed currency and billions tied up in government debt instead of being available for more productive purposes in the free market. "Deficits are like termites," says Alan Blinder, an economics professor at Princeton who served on the Federal Reserve Board under Bill Clinton. "Nobody sees them doing their dirty work, but over time they're corrosive."

The White House gets much of the blame from fiscal conservatives for allowing Congress to break the bank. "George Bush doesn't really have an anti-Big Government bone in his body," says Stephen Moore, president of the Club for Growth, a group that promotes limited government. "Compassionate conservatism means never having to say no."

Bush officials argue that most spending increases were necessary to fight terrorism and that smaller tax receipts resulting from the economic downturn played a bigger role than Bush's tax cuts in the deficit increase. The President has now promised to cut the deficit in half over the next five years. To achieve this ambitious goal, he wants to limit discretionary growth to 4% next year. But his budgeters are likely to make that number by not counting emergency, defense and homeland-security costs. Above all, the Bush team is counting on growing out of the deficit. If economic activity is robust, the thinking goes, revenues from taxes will increase despite lower rates. Thus far, the economy is doing its part to make that happen, churning in the third quarter at a scorching 8.2% pace. Job production appears to be inching back, and consumer confidence is at its highest level in more than a year. Deficits are bad, White House aides concede, but slavish concern about them — which they associate with Clinton Treasury Secretary Robert Rubin — would have kept them from passing the tax cuts they argue are fueling the current boom. "All the fears of Rubinomics have not come to pass," says a senior White House official.

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