Speaking for Nevada - May 2003

Fiscal Discipline Absent

From Administration’s Slick Ad Campaign

by Shelley Berkley

Recently, the president unveiled his proposed budget for the 2004 fiscal year. Each year, the budget is delivered to Congress in February, following the president’s outline of his plan in the annual State of the Union address. The period beginning with the State of the Union address and surrounding the release of the budget is traditionally associated with an intense lobbying effort and sales pitch from the president to generate support for the administration’s proposal. This year, in particular, has been marked by an intense advertising effort to sell a slick package of tax cuts, new programs and sleek new conceptual bureaucratic lines, loaded with special interest provisions. The advertising effort has been effective; the product certainly has been perceived as fast and attractive. But before America buys into this new budget with promises of more and more tax cuts, it is worth taking a longer look at what is being offered.

According to an estimate by the Office of Management and Budget – the president’s own number-crunchers – if this country follows the Bush budget, the fiscal year 2004 budget deficit will be the largest in U.S. history. Excluding money set aside for the Social Security Trust Fund, the deficit, under the president’s proposed budget, would reach a record $482 billion, outpacing even the 2003 budget, the largest nominal deficit to date at $468 billion.  In a startling admission for many, the White House sanguinely projects that the budget it has proposed will create deficits for at least the next five years, and possibly without any forecasted end.

While the country is running these record deficits, and the market once again turns its attention to rapidly-rising long-term debt, the president has proposed more than $385 billion to eliminate the corporate dividend tax. This is a tax break that will increase the capitalization of large, publicly-held corporations, and increase the profit margins of major investors. In both cases, profits and taxes are quickly sheltered and may not provide any general stimulus whatsoever. While there are a number of tax cuts that would have an immediate and profound impact on our economy – and help working families at every income level – the elimination of taxes on corporate dividends will not.

Even though our country is running deficits, I would not be opposed on principle to tax cuts. But the disappearance of $5.6 trillion in projected surpluses and the war in Iraq should give us some pause in our fiscal policy. If we are going to further reduce revenue through tax cuts, those cuts must absolutely be designed to stimulate the economy and help as many families as possible. Rate cuts or bracket hikes in the lower and middle income brackets would help every American family, no matter what their tax liability, and inject much needed liquidity into the American economy.

The Bush budget, however, recommends massive cuts aimed at corporate interests and the highest brackets. The impact of such cuts, while effectually increasing spending, is massive debt. As the debt mounts, America’s payments on the debt become a larger and larger proportion of our budget. These payments on the debt – effectively a hidden tax on the American taxpayer – do not buy any services. They do not fix any potholes. They do not help defend our country. They are simply the price of special interests, and the costs of abandoning our fiscal discipline.

Nevadans, more than most, have a pretty good sense of when an advertised product is too good to be true. In this case, we will do well to pay attention to our instincts. Running up the debt now with huge corporate tax breaks is not going to benefit the economy in this country, and it won’t benefit the regional economy of Nevada. Higher debt means higher interest rates and higher monthly payments. This means less money in the pockets of Nevadans and those who would ordinarily travel to Nevada. In this case, we don’t need the fancy new model of tax cuts and supply-side economics. If we are going to get our economy moving again, we need the tried-and-true model based on balanced budgets and sound stimulus packages that steered us straight to surplus in the mid- and late ’90s. Nevada – and the country – cannot afford to buy into the skyrocketing debt and deficits of the Bush budget. Instead, Congress – and the American people – should reject the administration’s slick advertising campaign and demand a more honest and responsible accounting of our federal budget.