Concord Coalition Urges Fiscal Caution

Following yesterday's deficit news, the Concord Coalition, a bipartisan organization devoted to fiscal sanity, "warned lawmakers not to use this welcome news as an excuse to enact new tax cuts or spending initiatives." In a press release, the group noted "Nothing about these numbers suggests a fundamental improvement in the mid- or long-term fiscal outlook."

Said Robert Bixby, the executive director: "Politicians should keep the fiscal champagne bottles corked. The real news here is that even with a strong economy and an unexpected revenue jump we still have a deficit in excess of $300 billion (2.7 percent of GDP) and interest on the debt has become the fastest growing category of federal spending. Moreover, the deficit for next year is projected to go up. If lawmakers get the idea that our fiscal challenges are behind us and view these numbers as a green light for new tax cuts or spending initiatives, they will make a bad situation worse."

The Coalition went on to note seven points to keep in perspective, including these:

- "The main fiscal consequences of the Administration’s major initiatives - tax cut extensions and Social Security personal accounts - occur beyond the 5-year budget window. Limiting consideration of current policies to the next five years thus gives a myopic and misleading view of the fiscal outlook.

- The numbers do not support the proposition that tax cuts result in higher revenues. In the Administration’s April 2001 budget, the baseline revenue projection for 2005 was $2.57 trillion. Following four rounds of tax cuts, the Administration is now projecting revenues for 2005 of $2.14 trillion.

- Revenues in 2000 totaled $2 trillion. They fell for three straight years and only this year will they get back over $2 trillion. Adjusted for inflation, revenues are still below the 2000 level. As a percentage of GDP, revenues fell from 20.9 percent of GDP to 16.3 percent in 2003 - the lowest such number since 1959 - before rising to 17.4 this year. Meanwhile, spending has risen from 18.4 percent of GDP in 2000 to 20.1 percent. under the Administration’s policies."

All these (and the others) are good points. As I said yesterday, it's going to take quite a lot more than sunny new projections to change the fiscal picture.

[Tip on this to The Eisenthal Report via Common Sense Desk].