Burden Set to Shift On Balanced Budget
By Lori Montgomery and Nell HendersonWashington Post Staff WritersTuesday, January 16, 2007; Page A01
When he takes the House rostrum next week for the State of the Union address, President Bush will list among his goals a balanced federal budget, a shift for a president who has presided over record deficits while aggressively cutting taxes.
Politically, analysts say, the president is calling the bluff of Democrats, who won control of Congress in part by accusing Bush of reckless fiscal policies. While Bush now shares the Democrats' goal to erase the deficit by 2012, the politically perilous work of making that happen -- cutting spending or raising taxes -- falls to the Democratic-run Congress.
"The Democrats have assailed deficits under President Bush. The White House is telling Democrats to walk the walk," said Brian M. Riedl, a budget analyst at the conservative Heritage Foundation.
Budget experts and economists from across the political spectrum, including some who worked in the Bush White House, say that Bush is unlikely to offer real concessions toward a balanced budget in the plan he delivers to Congress next month.
Still, the administration appears to be stepping away from an economic argument that has worked well for Republicans throughout Bush's presidency: that federal deficits, though at record levels, are not especially large as a percentage of the economy and therefore offer little cause for concern, a view famously encapsulated in 2002 when Vice President Cheney told Paul H. O'Neill, then the Treasury secretary: "Deficits don't matter."
Historically, the deficit is not particularly large. During Bush's presidency, it peaked at $413 billion in 2004, the biggest ever in dollars. At 3.6 percent of economic output, however, it did not approach the historic high, in 1943 during World War II, when the deficit exceeded 30 percent of gross domestic product . Last year, the deficit dropped to $258 billion, or about 1.8 percent of the economy.
But that view ignores some important facts, U.S. comptroller general David Walker said. The government is living far beyond its means, he said, and if not for excess cash in the Social Security trust fund, it would be recording deficits on a magnitude not seen since the recession of the early 1990s. Take away the Social Security money, and the deficit would have been $434 billion last year, about 3.3 percent of GDP, which rose 6 percent in 2005, compared with 2004.