President Bush has announced that he intends to cut costs in the 2005 budget. He is doing so because of the pressure he’s getting from many in the GOP who complain bitterly that he is piling up the highest deficits in the nation’s history after promising less — not more — government. For 2003, the federal deficit reached an all-time high: $374 billion. The projected deficit for 2004 is even higher — more than $450 billion.
To tame the runaway deficits, Bush is proposing expenditure cuts for the fiscal year of 2005. According to administration officials quoted in The New York Times, the cuts will “control the cost of housing vouchers for the poor, require some veterans to pay more for health care, slow the growth of spending on biomedical research and merge or eliminate some job training and employment programs.”
For many poor, for many veterans, for many in need of health care or job training, this is bad news. But it is also bad news for the rest of the nation.
When a poor family has its housing subsidy cut, it must pay more to the landlord out of its own pocket. That leaves less money for food, clothing, travel, a movie. When veterans have to pay more for health care, the same is true. When someone who loses a job is deprived of job training, ditto. In short, all these cuts into the income of millions of families mean a diminution of buying power. And that means a declining economy. But it does not end there. A declining economy means declining income for the federal government. And that means a greater — not a smaller — federal deficit.
Isn’t there anything else that Bush could do? Of course there is. He could — and should — repeal the multi-billion-dollar tax cuts that lopsidedly and shamelessly favor the economic elite of the nation’s households and corporations. It would seem obvious that when Uncle Sam is badly in need of money, he should not continue to bestow a gift of multi-billions on the favored few who are the wealthiest in the land.
So why doesn’t Bush do it? The official explanation is that these tax cuts, by enriching the richest, help everybody because the newly found wealth will be put to work to expand businesses and provide more employment. It’s a way to feed the birds by feeding the horses. President Reagan tried it. He cut taxes. The cuts were supposed to generate jobs, income and revenue for Uncle Sam. But they didn’t. When Reagan came into office, he decried the federal debt of a trillion dollars. When he left office, the debt had tripled.
Why? Because a billionaire would be an idiot if he puts his money into building a plant and hiring workers and turning out goods or services if there are no buyers for the product or service. Ours is a “market economy.” If the market is not there, production will merely result in a “glut,” the traditional name for a depression.
So what do the super-rich then do with the gifts given to them by Reagan and Bush? They go to the world’s greatest gambling den — Wall Street — to buy and sell pieces of paper in straight and crooked ways.
But the greatest danger still lies ahead — the time when the federal debt is so large that the U.S. Treasury can no longer service the debt. Then what? Much historical experience tells us. The government turns to the printing press and grinds out paper currency whose worth declines by the hour as it did in Germany during the 1920s. The result was — and will be — the simultaneous scourge of a depression and inflation.