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Former Clinton administration Secretary of Labor Robert Reich blogged last week about Why Balancing the Budget is a Stupid Idea. It's almost impossible to agree or disagree with his reasoning, because he doesn't provide any.

Oh, well, perhaps this part supports his argument:

Social Security surpluses show up in the budget as this year's revenues that offset this year's expenses. But in reality the surpluses are payments by post-war boomers who are still working — but who in a few years will be retired and making big withdrawals. What look like revenues will soon turn into big liabilities. The federal budget hides this inconvenient fact.

And Reich concludes from this that Dick Cheney is right, that deficits don't matter?

An alternative view is articulated by Senate Budget Committee chair Kent Conrad (D-NC):

The exploding number of retirees will be ready to collect Social Security and Medicare benefits, but the temporary surplus in those accounts we now enjoy will be gone. Instead there will be massive shortfalls. And, in addition, we will have to pay back what we have borrowed from those accounts. That's why dramatically increasing debt now is a ticking time bomb.

Robert Samuelson's column in the Washington Post this morning is a broadside against entitlement spending. You see, Samuelson believes that Congress will never balance the budget because so many Americans receive welfare (read: Social Security, Medicare, Medicade) that cutting such programs is politically impossible. And because raising taxes is also politically impossible, eliminating the federal budget deficit is impossible.

Annual budget debates are sterile -- long on rhetoric, short on action -- because each side blames the other for a situation that neither chooses to change. To cut spending significantly, conservatives would have to go after popular welfare programs, including Social Security and Medicare. To raise taxes significantly, liberals would have to go after the upper middle class, a constituency they covet (two-thirds of all federal taxes come from the richest fifth). Deficits persist, because neither side risks its popularity, and, indeed, both sides pursue popularity with new spending programs and tax breaks.

I know 7 years is a long time, but has Samuelson already forgotten about the budget surpluses in 1999 and 2000?

(click to englarge)

An interesting editorial in the NYT today outlines a plan that, if implemented, would seem to have a good chance of eliminating the deficit.

Three quick complaints:

• The authors are silent on the Bush tax cuts, so I assume they want them extended.
• They are pretty much silent on the estate tax, although the make an oblique reference to only taxing estates bigger than $7 million- a huge cut compared to recent levels.
• They have a shallow understanding of compromise. They propose that half of all deficit reduction come from spending restraint and half come from tax increases. They do not explain why a meet-each-other-half-way prescription lines up with public spending and tax priorities. Regardless, many of these rather severe spending cuts seem out of touch with public priorities.

Take a look for yourself.

WITH the new Democratic majority in Congress, President Bush finally talking about fiscal responsibility and the 2008 primary season about to begin, finding common ground between Democrats and Republicans on budget issues could not be more important. We are borrowing large sums from foreigners, leaving a legacy of debt, paying more than $1,600 per family in taxes just to cover the interest on the debt, and setting aside nothing to deal with future contingencies or investments.

True, last year's deficit of $248 billion, at 1.9 percent of gross domestic product, was not large by historical standards, and next year's may be even smaller. But a failure to deal with deficits and overall debt sends the message that we have no plan for the sea of red ink that will engulf the nation when the baby boomers begin to retire next year.

We have showcased a number of omissions, deceptions, and exaggerations this week within the president's FY 08 budget proposal, but another fine point was uncovered this week as well that missed our notice. It concerns assumptions for how much revenues will grow over the next five years.

The Congresstional Budget Office, a nonpartisan office in the legislative branch, does projections and estimates for specific legislation moving through Congress, as well as larger, long-term economic and budget projections across the government. Recently, CBO released their Budget and Economic Outlook for the next ten years. In that report, they project revenues will grow 5.8 percent over the next five years.

The president's budget, however, projects revenue growth at 7 percent over the next five years. This translates into $425 billion in additional revenues than CBO believes will materialize over the five year period and a hefty $157 billion in FY 2012 alone - the very year the president expects his policies to yield a $61 billion government surplus. Even if revenues grow at a slightly lower rate, the president's surplus projections will disappear.

This is just yet another example of many instances of extremely wishful thinking in the president's proposal that allows him to state that his budget will balance the budget by 2012. That, and the fact that he is planning on raising taxes on the middle class.

In the Washington Post today, Ruth Marcus recognizes that Bush is relying on a tax increase via the AMT to claim that he can balance the budget without raising taxes.

Looked at another way, what the Bush tax cuts give to taxpayers, the AMT grabs back. By 2012, if it isn't changed, the AMT would take back almost one-third of the Bush tax cuts...it would take back more than half of the tax cut for people making between $100,000 and $200,000.

...the AMT has been transformed from its original purpose, a means of assuring that the wealthiest pay at least some taxes, into a way of underwriting tax cuts for the wealthiest. Because the AMT hits fewer of those with the highest incomes, the rather comfortable end up subsidizing Bush's tax cuts for the super-rich.

Marcus's piece makes some other good points and neatly summarizes the coming troubles (or fixes as far as Mr. Bush is concerned) that the AMT will cause for middle-class taxpayers. She ends her column wondering:

That leaves the middle class, the better-off and corporations to divvy up the tab. In that context, does it really make sense to permanently repeal the estate tax? To leave in place lower tax rates for the richest Americans? To continue to tax capital gains and dividends at far lower rates than ordinary income? These are the choices that the Bush budget entails, even if it fails, deliberately, to spell them out.

OMB Watch has released a preliminary analysis of the President's FY 08 Budget request.

President's Budget Full of Cheap Rhetoric; Wrong Priorities
President Favors Tax Cuts for the Wealthy over Domestic Needs

Check back here for additional analyses and commentary on the budget as the week progresses.

President Bush's 2008 budget, to be released this morning, proposes to eliminate the deficit by 2012 with many spending cuts in various national health and well-being programs.

• $101.5 billion in cuts to Medicare and Medicaid over five years
• $223 million reduction in spending on the Children's Health Insurance Program, with cuts deep enough over five years to eliminate coverage for half of the children enrolled today
• $99 million savings by eliminating a childhood obesity prevention program
• $40 million cut in the Low-Income Home Energy Assistance Program, a program which helps people pay for their heating bills
• $9 million less for fighting cancer by reducing the National Cancer Institute's budget

Stay tuned for more of Bush's Big Budget Blow-out of '08