It's the Poor that Gets
Editorial Published November 5, 2005
by the Guardian/UK
As President Bush's popularity ratings sink to a new low, his administration has decided to attack the ballooning US budget deficit in an attempt to win back credibility. At least that is what is happening if you believe John Snow, the US treasury secretary, who said this week that the clear priority of the administration now was to meet the president's objective of halving the deficit by the time he leaves office. It is about time too because, as Alan Greenspan, retiring head of the Federal Reserve noted earlier this week, unless the situation is reversed, the worsening budget deficit "will cause serious economic disruptions", which is Greenspanspeak for a recession with heavy unemployment.
This is not the easiest time to tackle the budget deficit when military spending in Iraq is very high and the Katrina hurricane has forced the administration into an enforced Keynesian reconstruction programme involving increased public spending. But beggars can't be choosers. It has to be done. Mr Bush inherited a healthy budget surplus from the outgoing Clinton administration and squandered it partly on tax cuts at a time when Mr Bush was infused with Reaganite notions that deficits don't really matter. They do, and the bigger they get, the harder the subsequent fall unless they are tackled very carefully. This week the government's advisory panel on federal taxation unanimously proposed, among other things, that mortgage interest relief (which disappeared in Britain years ago) should be cut and that the deduction of state and local taxes for federal income tax be eliminated. These are not particularly radical options. They steer well clear of calls to rescind the unfair and economically dubious tax cuts which mainly benefited rich people who didn't need to spend the cash dispensed to them.
If the budget cuts passed by the US senate on Thursday are anything to go by, the whole thing will end in tears. Republicans - disgracefully - targeted most of the cuts on the elderly and the poor through restructuring (ie cutting) some Medicare and Medicaid programmes. Worst of all, part of the cuts originally aimed (creditably) at cutting America's ludicrously high agriculture subsidies was amended so the brunt would be taken by chopping $844m from food stamps for the poor rather than from farm subsidies. Meanwhile, Republicans are hoping to pass yet more tax cuts for the wealthy. An administration that can tackle a serious budget problem in this way deserves all that may be coming to it.