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Wednesday, February 08, 2006

Bush's Budget in Sound-Bites

In short, the Bush administration faces competing pressures to bring down the budget deficit, keep the nation safe, foster economic growth, and maintain popular social safety net programs. In an election year, the task grows only more difficult...."Republicans believe the poor and everyone else benefit from a growing and thriving economy, which is fed by capital investment," says Republican pollster Whit Ayres. "Democrats believe that the poor are best served by larger and larger government payments. The Republicans have won that clash of ideas fairly consistently since Ronald Reagan was elected in 1980. There's no reason to think they can't win that same argument again." (cite)

But this year, with no fanfare whatsoever, Bush stuck a big Social Security privatization plan in the federal budget proposal, which he sent to Congress on Monday. His plan would let people set up private accounts starting in 2010 and would divert more than $700 billion of Social Security tax revenues to pay for them over the first seven years....

Nevertheless, it's here. Unlike Bush's generalized privatization talk of last year, we're now talking detailed numbers. On page 321 of the budget proposal, you see the privatization costs: $24.182 billion in fiscal 2010, $57.429 billion in fiscal 2011 and another $630.533 billion for the five years after that, for a seven-year total of $712.144 billion.

In the first year of private accounts, people would be allowed to divert up to 4 percent of their wages covered by Social Security into what Bush called "voluntary private accounts." The maximum contribution to such accounts would start at $1,100 annually and rise by $100 a year through 2016 (cite).

President Bush has proposed a federal program that [includes school choice]. Bush's budget, released Monday, includes $100 million for a new program that would allow students at some schools to receive $4,000 scholarships for private-school tuition. Children who choose to remain in their public schools could receive $3,000 for outside tutoring. Congress would have to approve the measure (cite).

The three largest entitlement programs -- Social Security, Medicare and Medicaid -- will cost $1.2 trillion next year and, with other entitlement programs and interest payments, make up more than half the budget (cite).

"The White House brags about the list of 141 programs it has slated for terminations or cuts, but the list isn't that impressive. Bush's budget last year included a longer list (154 programs) with more savings ($17 billion). The Republican Revolution budget of 1995 listed close to 300 programs for termination or cuts with savings amounting to $40 billion, and that was at a time when the GOP controlled only one end of Pennsylvania Avenue.

"On entitlement programs, the president's Medicare plan is a needed step toward containing costs of the program. But the $36 billion in savings only brings the annual growth rate of the program to 7.7 percent from 8.1 percent. It’s a needed step, but a very small step" (cite).

But history suggests that regardless of the merits of the tightfisted plan, Congress is likely to take a pass -- unwilling to swallow bitter budget medicine in election years. When lawmakers have to face the voters, they don't like to support things like cuts to Medicare, food stamps, farm subsidies and education (cite).

Last year he recommended eliminating or substantially cutting 154 small programs for a savings of $15.8 billion; Congress acted on 89 of the proposals for a $6.5 billion savings, which is about three-tenths of 1 percent of total spending (cite).

I'm not quite as worred about the short-term ramifications of the budget deficit. It's large, but as a percentage of our GDP of 12.37 trillion in 2005, what's a few hundred billion? I'm most concerned about my taxes in the year 2020 and beyond. I really don't want to pay 23-30% of my income for social security and other entitlements. Nor, do I want the government to commit inflationary suicide by producing additional currency to "make up for the deficit". The option left is to cut spending, cut entitlements, or grow the economy. We can tell that Congress isn't interested in cutting spending or entitlements. So, let's vote them out; or, we can attempt grow the economy (by the way, increases taxes is not the way to do it). Perhaps by investing into technology and education (as the president does in this budget) we will see an improvement in quality and innovation of both industries.

Thoughtful Readers Speak:
One of my friends once said "Society is built on broken dreams". If everybody got to be a doctor who wanted to be a doctor, nobody would be flipping burgers at McDonalds. Some people just aren't lucky enough, or skilled enough, or whatever to have a decent job. Sometimes being poor isn't your fault - maybe the company downsizes and you're out of luck. But that doesn't mean they aren't human. And that means that even though the job is crappy and not valued as highly as other jobs that they should be paid enough to make ends meet and be provided with health care and a retirement plan. I look at social programs as a kind of insurance. Sure, I'm ok now and I don't need it. But I don't know what the future may hold. I might have an accident and not be able to work. A thousand things could happen. And if something does happen I'll be glad that society is willing to take care of me the way I am willing to take care of others in need while I am able.
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RIGHTFAITH: Where everything favors the stewardship of patrimony. All content is believed to be correct but may be amended based upon new information. The content of this page may be republished with proper citation without the expressed consent of the author. This site is not, in any manner whatsoever, associated with the religious philosophism from the Indian penninsula. All comments or emails to the author become the property of the author and may be published or deleted without notice or reason provided. Copyrighted 2005.

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