2005-02-14 00:19 (New York)

(Commentary. Gene Sperling, who was President Bill Clinton’s top economic adviser, is a columnist for Bloomberg News and a senior fellow at the Center for American Progress. The opinions expressed are his own.)

By Gene Sperling
Feb. 14 (Bloomberg) — Imagine the following: The father of a financially stretched family decides to live it up by leasing three fully loaded Hummer H1s for the bargain price of $9,750 a month.
As the family’s financial situation deteriorates, the father calls the family together for a belt-tightening discussion. He holds up a jar of Whole Foods chunky peanut butter and says, “Do you realize we are spending $4.49 on this? We could be saving $2.04 if we bought Skippy peanut butter for only $2.45.”
His teenage son responds, “Like, dad, man, why are you busting us about two bucks on peanut butter when you’re spending, like, almost $10,000 a month on cars?” The father sternly responds, “Don’t change the subject. We are talking about peanut
butter.”
On Feb. 7, President George W. Bush sought to use his 2006 budget to emerge as a born-again fiscal belt tightener. His goal was clear: Focus the fiscal debate on cutting programs for hardworking families and the poor — which are the financial
equivalent of peanut butter — while ruling out any effort to add up, put on the table or even acknowledge the budgetary equivalent of luxury Hummers — his tax cuts for the highest-income Americans.

The Cuts

Like the son in the family fable, most Americans understand the basic law that money is always fungible — a dollar on cars could also be a dollar spent on peanut butter. Yet Bush’s entire budgetary case rests on the assumption that no one will notice or change the subject to mention that his proposed spending cuts are dwarfed by the deficit-exploding tax reductions that he is seeking for high-income Americans.
Consider some of the cuts Bush is claiming are necessary to get tough on the deficit:
First, he would cut $500 million for job training and dislocated workers in the midst of what is still the slowest jobs recovery since the 1930s.
Second, he would virtually eliminate the $500 million Community Oriented Policing Services program when we are concerned about domestic terrorist threats.
Third, Bush would impose $4.5 billion in net cuts to Medicaid for the poor and disabled when health-care costs and the number of uninsured are rising.
And fourth, he would scrap the $1 billion a year in funding for the GEAR-UP and TRIO programs that reach out to economically disadvantaged children early and encourage them to go to college when our economy desperately needs a larger share of this population to obtain college degrees.

The Exemptions

Yet while these cuts add up to only about $6.5 billion a year, no one is supposed to mention that in the same budget Bush calls for implementing two obscure tax provisions that increase personal exemptions and itemized deductions that the top 2 percent of Americans can use to reduce their tax payments to the tune of $115
billion over the next decade.
That’s enough to prevent all these cuts and still reduce the deficit by $55 billion. Nor can we mention that if we pulled back on the income-tax cut (leaving alone capital gains and dividends) for the 0.5 percent of Americans making more than $400,000 a year, we could save $300 billion over the next decade — enough to buy a
lot of peanut butter and still make a big dent in the deficit.
Anyone who took seriously Bush’s commitment to deficit reduction might assume that his tight cap on domestic programs was motivated by the deficit exploding because such spending had gotten out of control.

One-Sided Reality

Yet, in an analysis conducted at the Washington-based Center for American Progress, it was found that when you exclude expenditure on defense, homeland security and international affairs, discretionary spending has actually decreased from 3.4 percent of gross domestic product in 2001 to 3.3 percent in 2005.
On the other hand, the decision to pass and extend three tax cuts and an expensive prescription drug benefit without any offsets is set to increase the deficit by more than $5 trillion over the next decade, including interest costs.
Even when looking at our long-term capacity to deal with the challenge of the baby boomers’ retirement, Bush is trying to construct this same one-sided budgetary reality.
While the Social Security Trust Fund is solvent, the president laments that in 2018 the government as a whole will have to “somehow” borrow an additional $200 billion to meet its legal Social Security commitments. Yet he seems oblivious to the fact that his own tax and spending policies will increase government borrowing that year by more than $500 billion.

Eat the Generic

Bush wants members of Congress to go home and tell their constituents that there is simply no choice but to achieve Social Security solvency entirely through benefit cuts with new price- indexing rules. Yet he disallows any discussion of the fact that making permanent his tax cuts for only the top 1 percent of earners
— as his budget calls for — costs almost as much as is needed to keep Social Security solvent for 75 years.
Still, I get it, Mr. President, I’m changing the subject. This budget isn’t about finding numbers that lead to deficit reduction, it’s about using the pretext of deficits to limit government’s role to help those most in need. Perhaps you think the father was right to forbid any discussion of luxury Hummers. Let them eat Costco
generic peanut butter.