Starving and feeding

I suspect that, like me, you've heard it both ways - "Starve a cold, feed a fever" and "Feed a cold, starve a fever" - so it's not surprising that there's no agreement on what to do when you're home sneezing and nursing a sore throat.

This is the same reason the budget debate in Washington has become so hard to take seriously.

On the one hand, some people have been saying the thing to do is starve the federal budget, cutting taxes to deny revenue for those who want to spend. That will force spending to be cut and the deficit to fall.

On the other hand, people are also saying that the only way to deal with the deficit is to feed the budget - that cutting taxes will increase revenues as the economy grows. Such growth, they argue, will make spending cuts unnecessary.

And when it comes to the budget, the same people often advocate both cures - that is, to deal with the deficit you should starve and feed the federal government. On some days their opinion is that taxes must be cut so that those people intent on spending will have nothing to spend. On other days they say the key is getting more revenue without increasing taxes so that spending can be paid for.

Unfortunately, both suggested budget therapies are about as sophisticated as your average home remedy.

Starving the budget is based on the obviously specious theory that the deficit will be an impediment to more spending. Somehow the deficit that is not restraining those who want to cut taxes is expected to stop those who want to spend more.

The Bush administration's budget policies and this year's budget debate show quite clearly that the deficit is not standing in the way of the tax cutters, so why should anyone assume that it will it be different for those who want to increase spending? Those who have steadfastly stated this year that a deficit is tolerable will have a hard time maintaining any credibility if they suddenly try to say that it matters again.

Just as important, the Deficit-Doesn't-Matter crowd has now fundamentally changed the federal budget debate in a way that will make it hard to put the deficit genie back in its bottle. Republicans and Democrats who want more for defense, homeland security, education, state aid, prescription drugs or anything else will be quoting by name those who have insisted the deficit is not a problem worth worrying about. The tax-cutters' arguments will be cited as the reason more spending is acceptable.

On the other hand, those who believe that feeding the government is the cure for the common federal budget cold are basing the efficacy of their remedy on the assumption that tax cuts will cause higher economic growth than would otherwise occur. And accelerated economic growth supposedly will lead to more government revenues.

But while there is a great deal of wishing and hoping that tax cuts will turbo-charge the economy, there is little incontrovertible evidence it will actually happen. As Federal Reserve Board Chairman Alan Greenspan recently told Congress, judging how a tax cut will affect economic behavior right now is possible only in theory.

Producing the revenues that are promised from a tax cut also requires that everything else in the economic and political environment occur as expected, and that never happens. For example, to the extreme chagrin of supply-siders, the Federal Reserve raised interest rates in the early 1980s, and the economy that President Reagan's tax cut supposedly was guaranteed to expand actually slowed. The past few years have also convincingly demonstrated that unplanned natural and manmade events - from drought to oil prices to terrorism - are virtually certain to change how the U.S. economy performs.

The big difference between a cold and the deficit is that few people try to make the cold worse. Whether it is chicken soup, extra vitamin C, or getting lots of rest, no one expects their efforts to make them even sicker.

By contrast, both the feeding and starving tonics for dealing with the deficit are likely to make it worse than it was before. And that's a bitter pill to swallow.

Question Of The Week

Last Week's Question. Who could possibly have known that there were so many horse racing enthusiasts who also care about the federal budget? Last week's question, which asked "Budget Battles" readers to come up with an appropriate name for a horse running in the Belmont Stakes, produced an incredibly large number of very creative responses, such as In The Red, Smoke 'n Mirrors, Balance B Damned, and A Trillion to One. Many people responded with some type of play on Funny Cide, the real horse that has won this year's Kentucky Derby and Preakness. But the winner of the "I Won A 2003 Budget Battle" mouse pad is Ian Hoffman, who works for the Justice Department, for his entry - Secretariat of the Treasury. Ian was selected at random from the three people who submitted similar responses.

A special mouse pad is also awarded to Mac Nachlas, who works for SMC Consulting in Linthicum, Md., for providing a list of horses with federal budget-related names that have actually run the Belmont - including Spendthrift, who won the race in 1879, Subordinated Debt (9th in 1991), Spectacular Bid (3rd in 1979), Dollar Bill (4th in 2001), and Accountant (3rd in 1906).

This Week's Question. Remember, once you win an "I Won A 2003 Budget Battle" mouse pad, your federal budget prowess will never be questioned again. Your friends and family will watch in awe as you work at your desk, and lesser colleagues will quake in your presence. The question: Which federal programs would have shut down first if an increase in the federal debt ceiling had not been enacted last week?

Click here to send in your response. Your answer must be received by 5 p.m. PDT on Saturday, May 31, 2003. The winner of the "I Won A 2003 Budget Battle" mouse pad will be selected at random from all those who submit correct responses. You must include your mailing address so the mouse pad can be sent if you are the winner.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure that the mouse pad actually gets to you.

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Starving and feeding
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