In an August 16 article about newly released deficit projections by the nonpartisan Congressional Budget Office (CBO), The Washington Post failed to report the estimated impact on the deficit of President Bush's proposal to make permanent the tax cuts of 2001 and 2003 that are currently scheduled to expire in 2011. The article, by staff writer Nell Henderson, ran in the newspaper's business section. By contrast, other major newspapers such as The New York Times, the Los Angeles Times, and The Wall Street Journal (subscription required) all ran A-section articles noting the CBO's projection: that permanently extending the tax cuts in 2011 would increase the deficit in fiscal years 2011 through 2015 by more than a trillion dollars.
From the Post article, which emphasized the partisan debate over whether to make the tax cuts permanent rather than citing the CBO's projections of the actual fiscal impact of such proposals:
Republicans on Capitol Hill viewed the CBO forecast as a vindication of the president's tax-cut policies, which they want to make permanent.
"We're clearly on the right track," said House Budget Committee Chairman Jim Nussle (R-Iowa). "The strong economy, higher revenues and falling deficit projections are all results of the successful leadership and policies of the Congress and the president."
But congressional Democrats, who want to let the tax cuts expire as scheduled by the end of 2010, warned that the short-term deficit improvement should not distract attention from the looming, long-term budget problem of covering rising Social Security and Medicare costs as the baby boomers retire in coming years.
"We need to change fiscal course," said Sen. Kent Conrad (D-N.D.), the ranking minority member on the Senate Budget Committee. "Continuing to cut taxes and increase spending only accelerates our buildup of debt."
The CBO's "baseline budget outlook" does not include Bush's plan to permanently extend the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 and the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003. However, later in the report, CBO estimates that making the two tax-cut policies permanent would increase the deficit by $155 billion in 2011, when they are set to expire, and by at least $260 billion in each of the remaining years assessed in the report:
| ||Fiscal year|
|Effect of extending EGTRRA and JGTRRA on the deficit (in billions of dollars)||-155||-260||-270||-284||-295|
The CBO also noted that another Bush proposal, to overhaul the alternative minimum tax (AMT), would increase the deficit "by about $247 billion (plus $24 billion in debt-service costs) over the 2006-2015 period."
Unlike the Post, August 16 stories by other major newspapers reported the impact that extending the tax cuts or overhauling the AMT would have on the deficit:
- The New York Times:
Congress has increased spending significantly since the budget office made its last official forecast, in March. The agency now foresees annual deficits totaling $2.1 trillion from 2006 to 2015. That is more than double the total of $980 billion forecast in March. Moreover, the budget office said, the cumulative total of federal budget deficits will be higher still -- $1.3 trillion higher in the coming decade -- if Congress makes the recent tax cuts permanent, as Mr. Bush has proposed.
Mr. Bush and many Republicans say the tax cuts should be extended to keep the economy strong. But the budget office said that such an extension could increase the deficit by more than $250 billion a year from 2012 to 2015.
- The Associated Press, which included debt service and "other" expiring tax provisions calculated in the CBO report to reach its figures:
Unlike White House estimates released last month, CBO assumes that Bush's tax cuts are allowed to lapse at the end of the decade. Most of the cuts in Bush's signature $1.35 trillion tax relief law enacted in 2001 expire by 2010, but many lawmakers and the White House assume that they will be renewed by then.
Even if the tax cuts were allowed to expire, the budget would still stay in the red through the full 10 years covered by CBO's report.
If the tax cuts are renewed, the deficit picture would worsen by $204 billion in 2011 -- to perhaps $327 billion or so. By 2015, the cost of extending the 2001 and subsequent tax cuts would reach $432 billion.
- The Los Angeles Times, which cited figures from the Center for Budget and Policy Priorities after incorrectly reporting that the CBO did not assess the impact extending the tax cuts would have on annual deficits:
[T]he budget office assumed that the Bush tax cuts enacted in 2001 and 2003 would expire in 2011, even though the president has said he would work to make them permanent.
Using this approach, the budget office found that the deficit, after shrinking by $33 billion in 2005 compared with its earlier estimate, would grow in each of the next 10 years by a combined total of $1.13 trillion.
The deficit would remain above $300 billon a year through 2010 and then, driven down by the expiration of the tax cuts, fall to between $50 billion and $100 billion from 2012 to 2016.
The budget office also projected the effect of more "realistic" policy assumptions, including phasing down U.S. operations in Iraq and extending the expiring tax cuts. The budget office did not do the arithmetic to show the deficits that might result, but the Center for Budget and Policy Priorities did.
The center found that annual deficits would not dip below $330 billion through 2015 and that, altogether, $4 trillion would be added to the national debt over the next 10 years.
- The Wall Street Journal, which focused on CBO's estimate of the impact on the deficit "[i]f Congress extends the capital-gains and dividend tax cuts and approves an AMT overhaul":
[T]he figures also show the dilemma Mr. Bush faces in trying to meet both his budget goal and another Republican priority: tax reduction. Congressional Republicans hope to overhaul the alternative minimum tax and make permanent Mr. Bush's cuts in the dividends and capital-gains rates, which are due to expire in 2011.
Both proposals would reduce government revenue, but the budget analysis released yesterday doesn't include the costs. It also doesn't take into account potential losses from an estate-tax overhaul.
If Congress extends the capital-gains and dividend tax cuts and approves an AMT overhaul, the total projected deficit for fiscal years 2012 to 2015 would swell to more than $1.5 trillion from $281 billion, according to CBO figures elsewhere in the report.