Alex's Outlook

Monday, June 23, 2003

Bush is now The Education President, The Farmers' President, The Seniors' President, The War On Terror President and The Child Tax Credit President. He will also presumably sign the House's $66 billion sop to the energy industry, among other things. I am really interested as to where he plans on cutting government spending.

If health care, education, homeland security, social security and the pentagon are all sacred cows, there is virtually nothing left to cut. Even factoring in the cost of the Iraq war, the deficit will probably still be at least $350 billion, which is around 3.3% of GDP. 3.3% annual deficits are actually sustainable, but that's not counting the spiraling cost of Medicare (especially after this $400 billion boondoggle that will cost way more than $400 billion). If Bush is planning on reforming Social Security without cutting benefits, well, that's going to take at least 1% GDP - $120 billion in 2004 and more every year after that. Realistically, Bush will have to borrow closer to 1.5% of GDP to privatize it in less than a quarter-century. Even 1.2% of GDP, however, would still put the annual deficit at 4.5% ($500 billion for today's economy), which is not sustainable at all.

Selling out to special interests - namely the farmers and the AARP - does not pay over the long run. Just ask George Pataki, who sold out to every union, lobby and other special interest within reaching distance and now finds all hell broken loose in terms of fiscal sanity and his own approval ratings, not to mention his prospects for a national Republican ticket.

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