Bush: How will he pay?
2004-11-05 15:26
Washington - With federal deficits already running amok, it is unclear how President George W Bush will pay for his second-term agenda, a potentially multitrillion-dollar smorgasbord that includes overhauling social security and revamping the tax system.
Bush laid out lofty goals on Thursday at his first news conference since his election day triumph.
He said he wanted to buttress social security, simplify the tax system, strengthen the economy, fight terrorism, bolster education, and battle Aids and poverty abroad.
"I earned capital in the campaign, political capital, and now I intend to spend it," the president said.
Pricy priorities
But all the political capital in the world won't pay for his pricey priorities. And unlike four years ago, when his first term began amid projections for $5.6trillion in federal surpluses over the next decade, the budget's future looks bleak.
Thanks to recession and the burden of higher spending and tax cuts that Bush won, the nonpartisan Congressional Budget Office now sees $2.3trillion in accumulated deficits over the next 10 years. That excludes the costs of wars in Iraq and Afghanistan, easing the alternative minimum tax's growing burden on middle-class families, and the long-term crunch retiring baby boomers will place on federal support programs like Medicare.
That leaves deficit hawks wondering how Bush would pay for his second-term wish list, finance the wars and meet his goal of halving federal shortfalls by 2009.
"I don't think you can do all of that and still cut the deficit in half in five years," said Robert Bixby, executive director of the bipartisan Concord Coalition, which favours deficit reduction.
Bush could decide to simply borrow the needed money, which would drive deficits higher, "and the real economic consequences of such a binge would come after he leaves office," Bixby said.
Bush wants to make 2001 and 2003 tax cuts permanent - they will otherwise expire by this decade's end - at a roughly $1 trillion price tag. He said Thursday he wants to simplify the tax system at no net cost, but in the past such exercises have often resulted in tax cuts as part of the drive to get lawmakers' votes.
Estimating costs
It is hard to estimate the long-term costs of the Iraq and Afghanistan wars, but this year's expenses alone may approach $100bn. Domestic security costs several tens of billions annually, while his initiatives for education and foreign aid are relatively small, just a few billion a year.
"All he talked about today were things that will increase the deficit," said Senator Byron Dorgan, a North Dakota Democrat. "He's going to have to at some point confront reality."
Financial markets may also play a role in Bush's second term.
Despite two consecutive record federal deficits - last year's was $413bn - the markets have yet to show much concern and interest rates have stayed low. - AP
- SAPA