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Political analysis and other daily rants on the state of the nation

Thursday | January 09, 2003

“We’re Looking At Deficits Forever”

If you want to see the poison pill that is the Bush economic plan, you need go no farther than the front page of Friday’s Washington Post. Now keep in mind, these are not Democratic economists or the folks from the Center for Budget and Policy Priorities (whom I would trust any day over anything that Mitch Daniels ever said). These are the folks from Wall Street. And what they report is that, even with a short war and minimal costs from the invasion and occupation, Bush’s plans to date and this plan if implemented will have consigned us to deficit spending into the next decade, squandering all surpluses and spending every dollar that was needed for Medicare and Social Security. Again, this is Wall Street talking.

Some quotes:

Assuming a relatively quick and inexpensive war and full implementation of the Bush tax cut, Wyss said the deficit should reach $275 billion in 2003, compared with the $109 billion deficit projected by the White House in August. By 2004, that number would reach $350 billion.

Those numbers are identical to estimates released yesterday by Morgan Stanley Dean Witter chief economist Richard Berner. Bank One and Economy.com, an economic research firm in Pennsylvania, have developed deficit forecasts that are slightly lower but still more than $300 billion. Merrill Lynch economists met with congressional forecasters yesterday to present a range of numbers that were roughly in line with the other Wall Street projections, a congressional aide said.

On Wall Street, the mood of forecasters has been bleaker for some time. Wyss called his projections "very conservative" because they use an "everything goes right" war. He also said he believes the White House has understated its dividend tax proposal by as much as 50 percent, because administration forecasters have not sufficiently accounted for the cost of one obscure provision that effectively grants a capital gains tax cut when investors sell stock in companies that elect not to pay dividends.

Mark Zandi, Economy.com's chief economist, said the president's proposal to end taxation on corporate dividends, coupled with tax cuts already enacted, would "significantly overwhelm the fiscal situation" within six years.

"The next president will have some very difficult decisions to make," Zandi said. "We're heading in the wrong direction."

Bush administration economists say the economic growth that could create that competition would also lead to a surge in tax dollars that will bring the federal budget back into balance.

That view does not take into account the demands that baby boomers will place on the Social Security and Medicare systems, private forecasters say.”

And then the kicker that should give everyone a chill:

"We're looking at deficits forever," Wyss said.”

Quite simply, all the money that was necessary to shore up Social Security, provide a Medicare drug benefit, pay for national security improvements, expand health insurance to the uninsured, fully fund the committments Bush made in his education package, improve our infrastructure, improve our public health system, and clean up the environment will be obliterated by this man in his first two years on the job.

It takes some devilish talent for a man to propose and implement policies that Wall Street now affirms will eat through multi-trillion dollar surpluses, policies that benefit few while potentially endangering and impoverishing the vast majority of the country he was sworn to protect.


Posted January 09, 2003 09:45 PM | Comments (29)


Bush Administration
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