SYNOPSIS: Either Bush knows he's bankrupting the government and doesn't care, which is bad, or he doesn't know, which is worse.
What do Medicare and the military have in common? Both are about to be betrayed in the name of tax cuts.
Start with the military. During the campaign George W. Bush warned audiences that America's military was in decline. "Not since the years before Pearl Harbor has our investment in national defense been so low as a percentage" of the gross domestic product, he declared. Strangely, if you looked at the numbers put out by his economic team, you found that he actually proposed to reduce that percentage further, spending substantially less on defense than his opponent.
Nonetheless, the military overwhelmingly supported Mr. Bush; officers thought that they had an understanding — nudge nudge, wink wink, say no more — that defense spending would quickly expand once he reached the White House. Indeed, senior officers have been telling Congress that they need a 30 percent increase in their budget. (Do they? Not my department.)
Guess again. Last week, according to newspaper reports, Mr. Bush told lawmakers that there would be "no new money this year for defense." Karen Hughes, a counselor to Mr. Bush, conceded that "we may in fact need resources" for the military — may? after all that martial rhetoric? — but made it clear that there was no rush. One officer bitterly declared, "It sounds like campaign promise No. 1 being broken."
Then there's Medicare. The Medicare system is currently running surpluses, but almost everyone agrees that the Medicare surplus, like the Social Security surplus, should not be considered available for tax cuts or new spending. The two programs both rely on taxes paid by working-age Americans to pay for benefits to current retirees, and both face a demographic crisis as the baby boomers get older. Their current surpluses are therefore, as everyone acknowledges, a necessary, even inadequate, provision for the difficult decades ahead.
Everyone acknowledges this, except the administration, which — unlike members of its own party in Congress — refuses to rule out raiding the Medicare surplus.
But isn't the federal government awash in surpluses? Hasn't Alan Greenspan told us that our big economic problem is how to give the money away, lest politicians end up owning the stock market? If there's plenty of money for tax cuts, why won't the administration give the military at least some of what it wants and promise to keep its hand out of the Medicare cookie jar?
Because someone in the White House is aware of the truth, which is that there isn't plenty of money after all.
Here's the arithmetic: the Congressional Budget Office has projected a 10-year surplus of $5.6 trillion. (I don't believe it, but never mind.) Take the Social Security and Medicare surpluses off the table, however, and you are left with only $2.7 trillion. That may sound like a lot, but the projected cost of Mr. Bush's tax cut has also grown, for reasons that are important but too boring to explain. It would now use up around $2 trillion of that surplus.
And what's left depends on the totally unrealistic assumption that federal spending, including defense spending, will not grow at all over the next decade, despite a growing population and a growing economy. Give the military what it says it needs, and we're already well into deficit — and that doesn't include missile defense, not to mention prescription drug coverage, new education programs and all that. Oh, and what about the trillion dollars of Social Security money that Mr. Bush has proposed to spend twice?
Nonetheless, Congress is about to go into a tax-cut feeding frenzy, adding huge tax breaks for corporations to Mr. Bush's proposal. The spectacle will be distressing, but it will be over quickly. Pretty soon, quite possibly as soon as this summer, we'll be worrying about deficits, not surpluses.
Of course, some conservatives would say that's the point, that we need to starve the government to shrink it. But what the federal government actually spends its money on is retirement, health care and defense; the rest is small change. So guess what gets shrunk? And if the military elite is shocked to find that this administration considers eliminating the inheritance tax more important than providing new weapons systems, that it is more concerned with the security of estates than the security of the state — well, that's what you get when you trust in winks and nudges instead of checking the numbers.
Originally published in The New York Times, 2.4.01