Basic Math

The federal budget proposal is an exercise in optimism or delusion, depending on your point of view.

If it sounds too good to be true, then it probably is. So it is with the Bush administration's $2.9 trillion budget request to fund federal operations in 2008. The White House promises to balance the budget in five years, dramatically increase funding for national parks, boost research into alternative fuels, expand military ground forces and pay for wars in Iraq and Afghanistan-all without raising taxes.

By trimming Medicare over the next five years and holding domestic spending below the inflation rate, administration officials believe they can substantially increase spending on defense and still end up in the black. But few people outside the administration, especially Democrats, who will have final say on the budget that emerges from Congress, believe the proposal is viable.

Sen. Kent Conrad, D-N.D., chairman of the Senate Budget Committee told The Washington Post, "This budget is filled with debt and deception, disconnected from reality, and continues to move America in the wrong direction."

Federal budget expert Stan Collender says the Bush administration's 2008 funding request is deceptive because it does not factor in costly things such as changing the alternative minimum tax, which would impose a huge tax burden on the middle class after 2008 if it is not revised-something neither the White House nor many Democrats want to happen. Yet the administration's budget counts those revenues against the deficit in future years. Nor does the budget realistically fund future operations in Iraq and Afghanistan. The budget supposes $50 billion in spending in Iraq and Afghanistan in 2009 and none thereafter-improbable assumptions considering the administration believes it will need more than $160 billion for the wars this year and $145 billion for the wars in 2008, numbers Defense officials say might even be inadequate.

Collender, managing director of Qorvis Communications in Washington and a contributing editor to NationalJournal.com (a sister Web site to GovExec.com), calls the budget request a "political event" and says if the spending projections were realistic, the administration would have to admit that it will be unable to balance the budget in five years.

The bipartisan, nonprofit Committee for a Responsible Federal Budget, which promotes fiscal discipline, applauded the inclusion of war costs in the 2008 budget request, a first since the war began. But William Frenzel, a former congressman from Minnesota and now co-chairman of CRFB, says comprehensive tax reform is necessary to address long-term budget shortfalls.

"That isn't going to happen," he says. Tax reform would require both presidential leadership and mutual commitment among Democrats and Republicans in Congress. "There's a slight improvement in civility," but not enough to make a difference, he says.

Unsustainable Trends

This isn't the first administration to play fast and loose with budget numbers. And Congress is not blameless. It's something of a Washington parlor game to promote spending proposals that have no hope of passage to gain favor with a particular constituency, or to omit funding for things that have broad popular support in order to force the burden of busting the budget onto political opponents.

The government has a long history of spending more money than it collects in taxes and other receipts. Data compiled by the Congressional Budget Office show that in only four years since 1962 (1969, 1998, 1999 and 2001) has the country brought in more revenue than it spent.

Exacerbating Washington's proclivity for fiscal indiscipline is the war. "The usual rules do not apply in war," says Cindy Williams, principal research scientist in the MIT Security Studies Program. What's more, many defense-related costs are not reflected in spending projections. Besides the costs associated with expanding the Army and Marine Corps and of the wars in Iraq and Afghanistan, there are likely to be tremendous increases in military and veterans' health care costs and unplanned cost growth for new equipment, Williams says.

Also, as recruiting and retention becomes ever more difficult should the war in Iraq drag on, there likely will be additional unplanned costs associated with pay raises and signing bonuses. "If the administration were realistic about the true costs [of Defense spending], then Americans would have to ask whether the plan is affordable at all," says Williams.

War costs are substantial; factoring in the administration's estimates for this year and next, the country will have spent $737 billion in Iraq and Afghanistan between 2001 and the end of fiscal 2008, according to Steven Kosiak, director of budget studies at the Center for Strategic and Budgetary Assessments. But the real enemy of fiscal solvency is the ballooning cost of entitlement programs: primarily Social Security and Medicare.

With baby boomers expected to begin retiring in large numbers in 2011 and Medicare and Social Security costs rising as the size of the workforce declines, pressure on the federal budget will grow substantially.

David M. Walker, U.S. comptroller general, is so alarmed by the government's financial condition that he embarked on a "fiscal wake-up tour" in 2005 to take his concerns directly to citizens. The Government Accountability Office, which Walker heads, estimates that Medicare spending alone will grow 331 percent between 2005 and 2030, while the gross domestic product will grow by only 72 percent over that period.

"Based on various measures-and using reasonable assumptions-the federal government's current fiscal policy is unsustainable," Walker writes in the preface to GAO's January report "Fiscal Stewardship: A Critical Challenge Facing Our Nation" (GAO-07-362SP). "Continuing on this imprudent and unsustainable path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our domestic tranquility and national security."

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