Keith,
This article is what will happen as these fantasies about the necessity for
less government are played out. The only answer is responsible political
action and people who think more and play less with computers as a
substitute for real growth, human value and true productivity.
Corporations have been protecting themselves by taking up the 40% slack in
real employment. If we were truly faced with an unemployment of 40% due to
industry only using what it needed in the labor force then all hell would
break loose. That is what the Canadians are intelligent enough to be
talking about these days in a GAI. I don't think that is the answer but at
least they are more serious then either the US or the UK on any of this.
Meanwhile look forward to the Texification of the UK. That is
globalization unchecked and without politicians of Bill Clinton's
intelligence and sensitivity. Dogma is always a poor substitute for life
don't you think?
REH
The Squeeze Begins
Tuesday, July 10, 2001; Page A20
THE IMPROVIDENT tax cut that Congress passed in May at the president's
request is producing a budget squeeze even faster than expected. Critics
said that within a few years the government would be forced to dip into
Medicare reserves to pay for the cut. But it now appears that that was a
sunny forecast. The weaker economy means government revenues will be lower
than anticipated. The latest estimate is that the government likely will
have to dip into the Medicare trust fund this year, and that next year it
will be tapping the Social Security trust fund as well.
Administration officials respond that the Medicare trust fund is nothing
more than an accounting device, and a misleading one as well. Therefore it
doesn't matter if they tap it. They add that even if they do tap it and --
who knows? -- take a little out of the Social Security trust fund as well in
the next few years, the overall budget surplus will be large and the
government will continue to pay down debt. Finally, the president's
spokesman said yesterday that he -- Mr. Bush -- sees signs of an economic
recovery not far ahead, thanks in part to the tax cut, of course. So not to
worry, is the implication; revenues will rebound and the budget fable will
remain intact.
But the fable is just that -- a fable. The squeeze is the reality, and the
squeeze already in evidence offers only the barest hint of what lies ahead
if this irresponsible tax cut remains on the books. The long-term fiscal
outlook is bleak, a serious matter that ought not be the subject of a game
of political gotcha in either direction.
The tax cut, if ever it becomes fully effective, will cost far more than
Congress pretended in passing it. The pretense was that it would cost no
more than $1.35 trillion over the first 10 years. To stay within that figure
the sponsors created a mirage of alternating effective dates -- backloading
some provisions so as not to take effect until toward the end of the
estimating period, meanwhile pretending that others would "sunset" before
the period was over. In the second 10 years, when all would presumably be
fully in effect, the cost would be in excess of $4 trillion.
Having understated the cost, the sponsors then greatly overstated the
supposed surplus that would be available to pay it. The main device was to
assume that discretionary spending, the appropriated funds for everything
but benefits such as Social Security and Medicare plus interest on the debt,
would be reduced in real terms by perhaps a sixth by future Congresses. That
isn't going to happen. Neither party would vote for it, nor should. The
long-term budget makes insufficient provision for the defense buildup that
the president and many in Congress nonetheless cheerfully advocate. It makes
insufficient provision as well for the Medicare drug benefit to which, in
different degrees, both parties are committed, and no provision at all for
strengthening the financial condition of either Social Security or Medicare.
It is, in other words, a fraud. That is the basis on which the tax cut was
enacted. The current surplus will not last. The country is headed back to
borrow-and-spend. The tax cut hastens the day. The Medicare trust fund is
indeed an accounting convention. The tapping of it is nonetheless an omen.
Funds that in not very many years will be needed to cover the government's
costs, including the cost of Medicare -- and that could be saved in the
meantime by paying down debt -- have been used instead to give a tax cut
mainly to the rich. If Medicare helps to pay for the tax cut, who then pays
for Medicare?
� 2001 The Washington Post Company
