$764 Billion Failure: It IS the Economy Duh-bya!

The $764 Billion Failure (fully linked at originating site):

When President Bush took office in 2001, he inherited a yearly budget surplus of $284 billion. At that time, he predicted a $516 billion surplus for fiscal year 2006. Yesterday, the Bush administration announced that, in 2006, the federal government ran a deficit of $248 billion, missing its projection by $764 billion. President Bush considered this a smashing success. In a speech yesterday, Bush said the numbers were "proof that pro-growth economic policies work" and an example of "sound fiscal policies here in Washington." Although the deficit declined from $318 billion last year, "the long-term outlook remains bleak." If the President is successful in implementing his economic agenda -- including making his tax cuts permanent for the wealthy -- "deficits will total nearly $3.5 trillion over the next 10 years."

THE SHELL GAME: Bush's main talking point yesterday was that he "cut the federal budget deficit in half" since 2004. This is only true in fantasy land. This year's deficit of $248 billion is more than half of the $413 billion deficit in 2004. In early 2004, the White House predicted a deficit of $512 billion, but that never happened. At the time, experts warned the number was inflated for political purposes. The political manipulation of budget estimates continues. Yesterday, Bush bragged, "In February this year we projected the federal budget deficit for 2006 would be $423 billion...Today's report...shows that the deficit came out at $248 billion -- so, $175 billion less than anticipated." It was "the biggest forecast miss in 21 years." Even his right-wing allies are skeptical. Brian Riedl of the conservative Heritage Foundation said, "The White House has a track record of projecting budget numbers to be a lot worse than they end up, which therefore helps them defeat the gloomy expectations and declare victory."

TAX CUTS DON'T PAY FOR THEMSELVES: Yesterday, Bush said, "Tax relief fuels economic growth, and growth -- when the economy grows, more tax revenues come to Washington. And that's what's happened." There is absolutely no evidence for Bush's claim. A 2006 analysis by the Congressional Research Service found "no evidence of supply-side effects from the tax cuts exists thus far." Even under the Bush administration's "best case scenario," tax cuts "would raise long-run income by 0.7 percent, enough to pay for less than 10 percent of the cost of making the tax cuts permanent." The cost of the tax cuts passed since 2001 was $251 billion last year, according to Joint Committee on Taxation estimates. Thus, "the federal budget would have been in virtual balance in 2006 if the tax cuts had not been enacted."

THE PUSH TO EXTEND TAX CUTS FOR THE WEALTHY: Bush made clear that the centerpiece of his economic policy would be to convince Congress to make "the tax cuts we passed permanent." Bush argued this will be essential if we "want to be the leading economy in the world." Respected economists disagree. William Gale and Peter Orszag of the Brookings Institution concluded that extending the tax cuts are "likely to reduce, not increase, national income over the long run." The reason? "[E]ven if tax cuts have modest positive effects on work and savings decisions, those effects are outweighed by the negative consequences of higher budget deficits." Overall, "making the tax cuts permanent would add more than $3 trillion to deficits over the next decade." For a fairer, simpler, fiscally responsible tax policy, see the Center for American Progress plan.