Thursday, February 06, 2003

The Real Danger of the Fiscal Budget


The Fiscal Year 2004 Budget, first discussed on the 4th, continues to provide endless amusement--until, of course, one considers that it is supposed to be a credible document, not a Tom Clancy novel.


This one becomes a tale of intrigue and outright lies on page 31, with the chapter--er, section--entitled "The Real Fiscal Danger." If you recall from the previous post (or see below), the White House has decided to shorten its budget projection to five years (all of which are, of course, in deficit). There are two things this allows them to do: either (1) not publish projections of greater deficits in future years which would belie their claim that the deficit trends downward or (2) project surpluses from the "stimulus" being provided that would imply that there will be revenues that would allow this and future administrations to maintain funding at current levels for some programs.


Which is most likely is, perhaps, a matter for speculation. However, the one piece of evidence presented (p. 28) indicates that the confidence bands for 2008 run from -$661B to +$281B. (It does not seem coincident, as a hint, that the document publishes the positive number first.) This implies that the mean expectation is a deficit of $190B. So from FY 2004 (-$307) to FY 2008 (-$190), there will be less than a 40% decrease in the annual deficit increase. It seems unlikely that the next 61.9% will become a surplus the following year, though I suppose it could happen if we do things such as charge Veterans more for health care, as the administration proposed today.


Apples and Oranges


So what we know so far is that (1) this Administration considers long-term budget projections unreliable, (2) we have a fiscal issue--deficits--that is not a crisis (see their commentary on the budget as posted on the 4th), and (3) the administration wants more tax cuts enacted.


What does this administration present for its brief discussion of Social Security and Medicare? 75-YEAR projections and then a present value legerdemain that they are the “real fiscal danger.”


Details to come.

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