Déjà Voodoo Economics

My friend and adversary Bruce Bartlett of the rabidly anti-tax National Center for Policy Analysis was tapped by Philadelphia public radio to defend President Bush's enacted and proposed tax cuts. Bartlett spoke glowingly about the tax cuts' sharp tilt in favor of the wealthy, and admitted that they're being financed entirely by borrowing. But that's no problem, he reassured listeners, because budget deficits don't really matter. Complaints about Bush leaving a crushing debt burden on our children are "not correct," Bartlett argued, because our children can just pass the debt on to their kids, who will pass it on to their kids, etc., etc., etc. "We'll simply pass this on forever," he said.

Before you dismiss Bartlett's deficit theories as the irrelevant ravings of an oddball, you should know that he's an influential figure with the Bush administration. In fact, Bartlett's comments echoed those of Bush's budget director, Mitchell Daniels, who opined in early March that he was not worried about "the dimension of today's deficits, and tomorrow's for that matter." After all, he said, "They didn't produce disaster before. They won't this time, either." And don't think that Daniels was speaking out of school. "The president finds [the deficits] acceptable," he said in February.

I've begun to wonder if there is any level at which George W. Bush and his advisers would stop being so blissfully unconcerned about deficits. As the other guest on the radio show, I posed that question to Bartlett. But he didn't really respond, other than to say he strongly favored zero taxes on most of the income of the wealthy.

So for fun and edification, I decided to investigate what might happen if we simply funded everything the government does, except for Social Security, by borrowing the money. Ignoring the likely economic meltdown, making heroically low assumptions about interest rates and keeping total federal spending (including interest) at the same share of the economy as it is today, here's what I found.

Within eight years interest on the ballooning national debt would cost more than all other federal outlays combined. About a decade later, the entire non-Social Security budget would be devoted to interest payments. Not a single penny would be available for defense, homeland security, roads, education or anything else.

After that, well, I had to relax my constraint on the size of total federal spending because interest payments would keep skyrocketing. Another decade later, federal spending, entirely on interest, would be twice as high a share of the economy as it is now -- assuming we still had an economy.

Of course, it's inconceivable that any Congress would vote to eliminate everything the government does except send out Social Security checks and pay interest on the debt -- or that the voters would tolerate it. And anyway, the president has proposed to finance a piddling one-third of non-Social Security spending with borrowing.

But my experiment illustrates how silly it is to contend that we can just keep rolling over an ever-growing debt to future generations without huge cost. In fact, the revisionist theory that deficits don't matter is really a cover-up. Later in the radio interview, Bartlett noted that he and his ilk hope that big deficits will force major cuts in public services -- cuts that would be hugely unpopular and thus politically impossible otherwise.

Promising big cuts in well-liked programs is not a recipe for electoral success. So most conservative politicians (as opposed to right-wing think tankers) prefer to espouse a happier, if completely contradictory, theory. They insist that cutting taxes on the wealthy will somehow lead to increased revenues and thus allow even more government spending. The president articulated this theory (sort of) last January, saying: "If you're worried about budgets, which we should be worried about budgets, the first question you ask is, how do you create growth in the economy? The more growth there is, the more likely it is you'll have tax revenues." Therefore, Bush argued, upper-income tax cuts "ought to be the centerpiece of public policy."

I don't know if Bush truly believes in this discredited fantasy -- "voodoo economics," in his father's famous phrase -- or has been duped by his handlers, who have another agenda. But the practical effect of falsely touting cost-free tax cuts and deficits that don't matter is insidious. At stake are both our economy and essential public programs -- some of which even Bush, as commander in chief, says he supports.

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