Lowry repeated Bush administration's reported budget deceptionJune 22, 2006 3:16 PM EDT ››› SIMON MALOY
In a June 20 National Review Online column, titled "The Wonder of Voodoo Economics," National Review editor Rich Lowry wrote that President Bush, who in 2004 pledged to cut the federal budget deficit (as a percentage of gross domestic product) in half by 2009, may follow through on that pledge by the end of 2006. According to Lowry: "The 2004 deficit had been projected to hit $521 billion, or 4.5 percent of gross domestic product. Bush's goal was to cut it to 2.25 percent of GDP by 2009 -- not exactly as stirring a national goal as putting a man on the moon, but one that was nonetheless pronounced unattainable. This year, the deficit could go as low as $300 billion, right around the 2009 goal of 2.5 percent of GDP." But Lowry's analysis makes what some experts have said is an unwarranted assumption: that the Bush administration's deficit projections were genuine. In fact, experts have said that the Bush administration routinely offers inflated deficit projections so it can then take credit for actual deficits that come in below those projections. The 4.5 percent number Lowry cites is an example -- the actual 2004 deficit turned out to be 3.5 percent of GDP. Lowry wrote:
Who says you can't cut taxes, increase spending, and reduce the federal budget deficit all at the same time? That's what the Bush administration has managed to do. Two decades after then-presidential candidate George H.W. Bush characterized Ronald Reagan's idea that tax cuts would spur revenue-generating economic growth as "voodoo economics," the witch doctor is again at work.
When President Bush pledged in 2004 to cut the deficit in half by 2009, critics guffawed. The Boston Globe headlined a story, "Bush's plan to halve federal deficit seen as unlikely; higher spending, lower taxes don't mix, analysts say." "Fanciful," "laughable" and "all spin," said the critics.
Well, it turns out that 2009 might be coming early this year. The 2004 deficit had been projected to hit $521 billion, or 4.5 percent of gross domestic product. Bush's goal was to cut it to 2.25 percent of GDP by 2009 -- not exactly as stirring a national goal as putting a man on the moon, but one that was nonetheless pronounced unattainable. This year, the deficit could go as low as $300 billion, right around the 2009 goal of 2.5 percent of GDP.
Lowry was referring to the Congressional Budget Office's (CBO) May 2006 Monthly Budget Review, which stated: "CBO now expects that the 2006 deficit will be significantly less than $350 billion, perhaps as low as $300 billion." But at the time Bush made his promise to halve the deficit by 2009, the White House's projected deficit of $521 billion was viewed as inordinately high, as it turned out to be. As Investor's Business Daily noted on June 13: "Bush made his vow when the White House had a dour 2004 deficit forecast of 4.5% of GDP, or $521 billion. The actual '04 deficit came in at $412 billion, or 3.5% of GDP, before falling to $318 billion, or 2.6% of GDP, in 2005." On Feburary 3, 2004, The New York Times reported:
William Gale, a budget analyst at the Brookings Institution, said Mr. Bush had implicitly made his deficit-reduction goal easier by projecting a surprisingly high budget deficit of $521 billion this year. Under the current budget plan, Mr. Bush can fulfill his deficit pledge even if the government has a shortfall of $237 billion in 2009. By contrast, the administration's budget plan last year proposed reducing the deficit to $190 billion by 2008.
Washington Post staff writer Jonathan Weisman also reported that the White House routinely issues deficit projections that are very high, and then boasts when the actual numbers are below their estimates. The CBO's May 2006 projection differed significantly from the White House's January 2006 prediction that the deficit would exceed $400 billion by the end of the fiscal year. Weisman reported on January 13:
This is the third straight year in which the White House has summoned reporters well ahead of the official budget release to project a higher-than-anticipated deficit. In the past two years, when final deficit figures have come in at record or near-record levels, White House officials have boasted that they had made progress, since the final numbers were below estimates.
"This administration has a history of overestimating the deficit early in the year, lowering expectations, then taking credit when it comes in below forecast," said Stanley E. Collender, a federal budget expert at Financial Dynamics Business Communications. "It's not just a history. It's almost an obsession."
Indeed, the dire new forecast came the same day that Treasury Department officials were touting a very different picture: The federal government posted the first budget surplus for December in three years, buoyed by a rush of corporate tax payments that more than offset record spending. On Jan. 6, the nonpartisan Congressional Budget Office reported that the deficit for the first three months of the fiscal year was about $119 billion, almost exactly where it stood for the first quarter of fiscal 2005.