Tuesday, February 07, 2006

Budget Projections Unrealistic

Federal budget projections going out to 2011 fail to account for known events as well as contingencies for likely events. While the projections assume permanent passage of past tax cuts as well as a decrease in congressional discretionary spending, they fail to take into account any cost beyond 2007 for the War on Terror. (Washington Post: Budget Plan Assumes Too Much, Demands Too Little).

Goldman Sachs has already begun advising clients that the deficit projections included in the budget are unrealistic. Members of Congress are already denouncing this budget as a non-starter. Business analysts find the budget laughable. Said Stanley E. Collender of Financial Dynamics Business Communications, "This budget is not going to happen. Of all the budgets I've seen recently, this is the one going nowhere the fastest."

There are two issues that I have with this budget as proposed. First, it completely ignores necessary spending in Afghanistan and Iraq, nor does it account for the likelihood of military spending in either Iran or Syria. The former, at least, is a solid enough prospect that some provisions must be included in the budget. It's absolutely unrealistic to assume that after 2007 we'll no longer encounter any situation that requires the use of military force.

Second, the budget does not go far enough in eliminating non-military expenses. First and foremost, the responsibilities of the federal government are for national security. Anything beyond that is a benefit that is subject to cuts when the budget is tight. Yet, we consistently see efforts to increase potential revenue (such as opening ANWR to drilling) or efforts to curtail social spending (such as agricultural subsidy cuts) stymied in Congress.

With the cost of energy skyrocketing and interest rates continuing to trend upward, the cost of living for the average American continues to grow far beyond figures quoted by the government in their cost-of-living index. A trip to the local supermarket or gas station tells you that, although food and energy are conveniently omitted from inflation indexes. It's clear that tax cuts implemented to stimulate the economy must be made permanent. To hit the public with an effective tax increase by not making them permanent would have a devastating impact on the economy as a whole.

So if taxes are not going to increase - and they cannot - and we know that military expenses are going to continue to grow, where will we get the funding to support this? Well first and foremost, open ANWR to drilling. There's plenty of potential revenue there and we should be making good use of it. The caribou certainly are not using it. Second, slash all non-military expenses in the existing budget. That's not something any congressman wants to do, especially in an election year, but that is what must happen.

The budget as proposed will not fly. It's not going to make any headway in Congress and it's a very unrealistic and overly optimistic projection out to 2011. Hard cuts are needed in social spending, and the time to start that is now.


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