|
Lead quote,
for benefit of busy scanners: The estimates
reflect the extent to which the annual deficit, the national debt and other
widely reported, backward-looking data are becoming archaic and misleading as
measures of the government’s solvency.”
Report Warns of Chronic
U.S. Budget Deficits
By
Peronet Despeignes, FT.com May 29, 2003 @ http://www.nytimes.com/financialtimes/business/29FT-DEFICITS.html The Bush administration has shelved a
report commissioned by the Treasury that shows the US currently faces a future
of chronic federal budget deficits totalling at least $44,200bn in current US
dollars. The study, the most comprehensive
assessment of how the US government is at risk of being overwhelmed by the
"baby boom" generation's future healthcare and retirement costs, was
commissioned by then-Treasury secretary Paul O'Neill. But the Bush administration chose to keep the findings out
of the annual budget report for fiscal year 2004, published in February, as the
White House campaigned for a tax-cut package that critics claim will expand
future deficits. The study asserts that sharp tax increases, massive spending
cuts or a painful mix of both are unavoidable if the US is to meet benefit
promises to future generations. It estimates that closing the gap would require
the equivalent of an immediate and permanent 66 per cent across-the-board
income tax increase. The study was being circulated as an
independent working paper among Washington think-tanks as President George W. Bush on
Wednesday signed into law a 10-year, $350bn tax-cut package he welcomed as
a victory for hard-working Americans and the economy. The analysis was spearheaded by Kent Smetters, then-Treasury
deputy assistant secretary for economic policy, and Jagdessh Gokhale, then a
consultant to the Treasury. Mr
Gokhale, now an economist for the Cleveland Federal Reserve, said: "When
we were conducting the study, my impression was that it was slated to appear
[in the Budget]. At some point,
the momentum builds and you think everything is a go, and then the decision
came down that we weren't part of the prospective budget." Mr O'Neill, who was fired last December, refused to comment. The study's analysis of future deficits dwarfs previous
estimates of the financial challenge facing Washington. It is roughly equivalent to 10 times
the publicly held national debt, four years of US economic output or more than
94 per cent of all US household assets. Alan Greenspan, Federal Reserve
chairman, last week bemoaned what he called Washington's "deafening"
silence about the future crunch. President Bush signed into law a $350bn tax-cut package on
Wednesday saying:``We can say loud and clear to the American people: You got
more of your own money to spend so that this economy can get a good wind behind
it.” The estimates reflect the extent to which
the annual deficit, the national debt and other widely reported,
backward-looking data are becoming archaic and misleading as measures of the
government's solvency. Mr Smetters, now a University of
Pennsylvania finance professor, said tax cuts were only a fraction of the
imbalance, and that the bigger problem "is the whole [budget] language
we're using". Laurence Kotlikoff, an expert on long-term budget
accounting, alleged in a recent Boston Globe editorial that the Bush
administration suppressed the research to ease passage of the tax-cut plan. An administration official said the study was designed as a thought-piece for internal discussion
- one among many left every year on the cutting-room floor - and noted the
budget's extensive discussion of projected, 75-year Social Security and
Medicare shortfalls. |
