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August 17, 2005

Why Oh Why Can't We Have a Better Press Corps? (Washington Post Budget Coverage Edition)

Ah. Max Sawicky's comments on the budget raise a question: are the Washington Post's budget reporters short-sighted, uninformed, and incompetent, or just pretending to be so because not being short-sighted, acting informed, or writing competently gets them hit on the snout with a rolled-up newspaper?

MaxSpeak, You Listen!: NAUGHTY BUDGET BITS: The Washington Post story begins: "The federal budget-deficit picture turned brighter Monday as congressional scorekeepers released new estimates showing the level of red ink for the current fiscal year would drop to $331 billion."...

The purported "brightening" depends on:

  • Discretionary spending falling from 7.8 percent of GDP in 2005 to 6.8 by 2009. This will probably not happen....
  • A built-in revenue increase due to the cessation of the annual short-term fixes for the Alternative Minimum Tax (AMT) that prevent it from growing.
  • A temporary surge in corporate income tax (CIT) revenues, about which more below....

The vaunted improvement in the year-over-year 2005 deficit -- which marks the limit of the Post's fiscal horizon -- comes in large part from a big jump in corporate income tax payments -- about $80 billion. This jump is bigger than the growth in actual corporate profits, so in this sense the vast bulk of the increase cannot be attributed to economic growth. (CBO attributes just $1 billion of the revenue jump to the economy.) Part of the increase is due to the provisions of the 2002 tax cut, which included a depreciation benefit....

Rarely is the question asked, how goes our Republican Era of Hard Work for Limited Government? Discretionary spending for FY2005 is now estimated at $962 billion. In 2001 it was $649 billion, for an average annual rate of growth of 10.3 percent, warming the hearts of communists all over this great land of ours. People said this would happen if you voted for Al Gore, and they were right!... Since January, discretionary legislative action increased total outlays by $34 billion for this fiscal year (ending in September), and by $1.2 Trillion-with-a-T over the next ten years. Most of this is defense spending.

To be sure, some of this spending was for worthy purposes in the national interest. Our personal favorite, previously noted here, is for a museum commemorating the noble Packard automobile.

The cover of the CBO report shows combined spending for Medicaid, Medicare, and Social Security rising from between eight and nine percent of GDP in 2005, to between ten and eleven percent of GDP in 2015. Inside there is a little table showing the 2004 trade deficit at $666 billion.... Whatever happens to the 2005 or 2006 deficit is not even a sideshow. It's a flea circus. The U.S. economy is facing two giant imbalances: the projected gap between tax revenues and Federal spending, and the current, growing gap between what the U.S. buys and what it sells to the rest of the world. The measure of our political system's vacuity, fed by a brainless commercial media, is the inability to put these issues on the table. When forced by a crisis to do so, the remedies will likely by short-sighted, panicked, and stupid...

Posted by DeLong at August 17, 2005 11:02 PM