Bush Administration is Misleading America on Deficit Reduction

While the administration claims the deficit is coming down, it leaves out large costs from its outyear projections, such as realistic ongoing war costs, the cost of AMT reform beyond this year, and the long-term costs of making the President’s tax cuts permanent, especially the recently passed, back-loaded expansion of Roth IRAs. When these costs are added in, the deficit explodes.

The Bush administration also ignores the fact that the debt is increasing far more than the deficit levels claimed. When the Social Security and other trust fund surpluses also being spent are factored in, the debt will actually go up by more than $600 billion every year, for as far as the eye can see.

The administration’s claims about revenue are similarly misleading. It cites the recent revenue improvement as proof that its tax cuts have worked. Yet, it ignores the fact that revenues are still down dramatically as a percent of GDP, and that revenues in 2006, even with the recent improvement, are still far below earlier projections of revenue levels for this year. Revenues always recover when the economy pulls out of a slump, but the recovery this time has lagged far behind the recovery typically seen in past business cycles. In fact, inflation-adjusted revenues in 2005 were still 2.5 percent below their level in 2001, whereas real revenues had typically grown 9.9 percent by this point in past recoveries.

The reality is that the President’s fiscal policies have been a failure. Record surpluses have been turned into record deficits and debt. And under almost every key economic measure – such as real median household income, GDP growth, business investment, and private sector job growth – the Bush economy has performed worse than the average of the nine previous recoveries since World War II. It is long past time for a new fiscal course for our nation.