WASHINGTON -- The Concord Coalition said today that President Bush's fiscal year 2007 budget takes an appropriately hard line on spending, but its claim to result in significant deficit reduction relies on budgetary gimmicks that understate likely expenses and overstate likely revenue. Moreover, in an ominous sign of the long-term fiscal pressures beginning to build, the budget shows the deficit increasing again in 2011.
Concord pointed out that the deficit projections in the budget assume that costs for military operations in Iraq and Afghanistan will decline substantially in 2007 and that there will be no further costs after 2007. Furthermore, the estimates assume a growing revenue windfall from the alternative minimum tax (AMT) after 2007. Neither is a realistic assumption and neither is consistent with administration policy. The cost of continuing the war efforts and providing AMT relief would add nearly $500 billion to the deficit over the next five years and more than $100 billion in 2009 alone.
“The numbers in this budget are not realistic and the policy proposals fail to make the necessary trade-offs to put us back on a more fiscally responsible path. The mix of spending and tax cut proposals in the President's budget would actually increase the deficit by more than $400 billion through 2011 -- even without counting the likely costs for military operations and AMT relief. When the full costs of the President's policies are included, the deficit will remain in the vicinity of $300 billion for the rest of the decade,” said Robert L. Bixby, executive director of The Concord Coalition.
“Beyond then, the combination of expanding entitlement costs and proposed tax cuts would lead to much higher deficits -- a problem that is hidden from view in the administration's five-year budget window. Even if the President's budget does manage to cut the deficit in half by 2009, so what? Not only is this a significant retreat from the bipartisan balanced budget goal that existed only a few years ago, but focusing undue attention on cutting the deficit in half by 2009 diverts attention from the more daunting long-term fiscal challenges signaled by the increase in the deficit after 2010,” Bixby said.
The revenue loss from the President's proposals swamps the savings from entitlement programs. The budget would permanently extend the tax cuts enacted in 2001 and 2003 for a revenue loss of nearly $120 billion in 2011 alone without identifying any offsets, even though the projected surpluses that were supposed to finance the tax cuts when they were originally enacted have long since been replaced by projected deficits. The total revenue loss over five years is $285 billion. Meanwhile, the proposed entitlement savings come to just $65 billion.
“Breaking our nation's addiction to debt will require Presidential leadership and bipartisan cooperation,” added Concord Coalition Policy Director Ed Lorenzen. “While the President's proposals to address soaring entitlement costs are an encouraging step, the budget does not signal a willingness to make trade-offs by putting everything on the table. The President must invest political capital behind these proposals and demonstrate a willingness to compromise by applying fiscal discipline to his priorities in order to reach a bipartisan solution to our long-term fiscal challenges.”
The Concord Coalition is a nonpartisan, grassroots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Concord's co-chairs are former Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE). Former Commerce Secretary Peter G. Peterson serves as President of The Concord Coalition.