CAN BUSH REIN IN THE RED INK?
February 6, 2006
Will President Bush be able to meet his goal of cutting the deficit in half by the time he leaves office in January 2009? Probably not, since this year's budget deficit ($337 billion) is estimated to be even larger than last year's ($318 billion), says Lauren Etter of the Wall Street Journal.
If the economy grows fast enough, Bush may be able to meet his goals; however, the fiscal problems reflect long-term issues, as baby boomers begin to retire and collect Social Security and Medicare benefits, says Etter.
- In fiscal 2006 -- which ends September 30 -- the federal government will likely spend $2.65 trillion and bring in just $2.31 trillion in revenue, creating the projected $337 billion deficit.
- In 1975, Social Security, Medicare and Medicaid consumed 25 percent of all federal spending; today, the three account for 43 percent, and by 2030, there will be two workers, instead of today's 3.3, paying into the Social Security system for every one beneficiary.
- As baby boomers start to become eligible for Social Security and Medicare in 2008, spending on those programs will grow faster and by 2016, they will account for half of all federal spending.
- Currently, federal revenue accounts for about 18 percent of the economy, slightly below the average since 1965; however, if the president's tax cuts are made permanent, the government's tax take would be 17.3 percent of gross domestic product (GDP) in 2016.
- Defense spending in 2006 will top $500 billion, or 3.8 percent of U.S economic output, and represent about one-fifth of the entire budget.
However, in 2005, the federal government spent on average over $20,000 for each household, which is more than Clinton ($18,000), Reagan ($14,000) and Nixon ($12,000) ever did, says Etter.
Source: Lauren Etter, "Can President Bush Rein In the Red Ink?" Wall Street Journal, January 28-29, 2006.
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