Drunken sailor economics

"His proposals add up to almost $2 trillion, but he doesn't say how would offset the cost of his own entitlement proposals," she says.

A later section of the budget sneers that a "common misconception (or distortion) is the suggestion that today's deficit is a consequence of the 2001 tax cut." The administration maintains that if the president's $1.35 billion tax cut of 2001 had never become law, deficits would have been even worse because the economy would have been even weaker. The matter is debatable, of course. Approximately 40 percent of the deficits are due to a loss of revenue caused by the tax cut.

In another section of the budget, the administration pooh-poohs the graveness of the situation. "By any measure, the projected deficit for 2004 must be judged as moderate," it states. "As a share of the economy (GDP), it would be smaller than in 12 of the last 20 years. Perhaps the best indicator of the deficit's current impact is the interest costs it imposes on the budget. Due to today's extraordinarily low interest rates, the carrying costs of outstanding debt will actually fall this year from $171 billion to $161 billion."

That may be true, but many economists believe that with deficits come higher interest rates. On CNN on Monday, OMB director Daniels argued that no correlation between the two had ever been proven.

Not that critics like Bixby think that the Democrats would do any better. "It's politically irresistible to attack the huge deficits coming under President Bush's watch," he says. "At the same time, they will accuse him of underfunding homeland security and Medicare and education and transportation and lots of other things, and they are reluctant to take him on about taxes. Were they in charge we might be still facing a similar situation."

Conrad, the Senate Budget Committee Democrat, angrily disputes this take, noting the massive $1.3 trillion size of the 2001 president's tax cut, and Bixby did note that the Democrats' current tax cut proposal is smaller and more front-loaded and that it "doesn't face the danger of a long-term fiscal drag" like the president's plan.

How will politics affect any of this? When asked if Democrats had strategized on how best to use the president's deficits as a political tool, Conrad said, "Uh, no."

But of more importance, in the short term at least -- since they do control the House and Senate -- is what Republicans on the Hill will do.

Back during the Clinton years, House Budget Committee chairman Jim Nussle, R-Iowa, for instance, once pledged not to run for reelection if that deficit weren't halved four years later. After he proclaimed his goal met, he bragged that it "took a Republican-led Congress to pull the purse strings tight on Bill Clinton, but Congress controls spending, and that's why I wanted to be on the House Budget Committee" -- to make "the tough choices, and we are reducing the deficit."

Now, however, Nussle has a different take on it all. Nussle says that "It is important to note that the circumstances that initially erased the surpluses and brought us into deficit are still present."

"That's what's scary," Bixby says. "There is little resistance to deficits on the Republican side now. People who you'd think would be cautioning are justifying them instead."

With baby boomers set to begin retiring in the next decade, Conrad seems most concerned about the effect this will have on retirement programs. "The head of CBO said last year that the effect of these proposals on retirement programs are these: unsustainable increases in debt, unprecedented tax increases, and/or the elimination of the rest of government as we know it. I mean, we're headed for a cliff and the president says, 'Full speed ahead!'"

"Hellooooo?" Conrad asks. "Is anybody listening?"

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