This opinion piece ran in the Boston Herald on Saturday, October 19, 2002
It's time for a reality check on taxes. Congress has reverted to credit card financing on a massive scale and the public, feeling overtaxed, is disinclined to issue the standard credit card notice: 'Please be advised that you have reached your borrowing limit.'
Yet without drastically reducing expenditures, which no Congressional committee is proposing, Congress cannot responsibly ignore the need for new taxes as soon as our economy recovers.
The Congressional Budget Office says the government ran in the red by $157 billion for the fiscal year just ended. This deficit rises to a whopping $346 billion, almost the size of the military budget, once Social Security and Medicare surpluses are excluded. Worse, nearly all the $5.6 trillion surplus predicted by President Bush and Congress to justify last year's 10-year, $1.35 trillion tax cut has disappeared. CBO estimates deficits through 2010 near $2.4 trillion if Social Security and Medicare surpluses are ignored, as they should be.
Moreover, none of CBO's figures anticipates any new expenditures. Here are just a few possibilities: a prescription drug program for the elderly, a Marshall Plan for Afghanistan, a more comprehensive program of domestic security, a beefed-up Securities and Exchange Commission, and, yes, an invasion of Iraq plus years of occupation and nation-building.
Regrettably, Congress is loath to turn the spotlight on itself and its disingenuous budget assumptions. Some members propose even new, supply-side tax cuts, which will be more costly than stimulative. Only a distinct minority of Congress favor suspending the 2001 tax cuts. Indeed, many propose to make the cuts permanent after 2010, which would reduce tax revenues by a staggering $4 trillion for the ensuing 10-year period, according to the Center on Budget and Policy Priorities a Washington based advocacy group.
Recall President Eisenhower's counsel in 1954: Resisting proposals to cut taxes from levels far higher than they are today, he reminded Americans of the â€œgood adviceâ€ of George Washington, 'We should not ungenerously impose upon our children the burden which we ourselves ought to bear.'
In the absence of reforms, the Social Security Trust Fund is likely to be exhausted around the year 2038. To address this problem now, Congress must either raise Social Security tax rates or reduce future benefits. If it waits until 2038 to maintain benefits, it must raise Social Security taxes by nearly 40 percent. Privatizing Social Security would be anything but a quick fix. Because privatizing diverts payroll taxes into individual accounts, Congress most likely would have to raise Social Security taxes now to avoid depleting the Trust Fund well before 2038.
Spending on Medicare and Medicaid is increasing rapidly with advances in medical technology, greater uses of medical services, and greater longevity of the population. The federal government's share of Medicaid costs will continue to rise as states encounter their own financial difficulties.
A first step toward sound budgeting would be to cancel all 2001 tax cuts that are to become effective in 2003 or later. Unfortunately, this wouldn't come close to paying for projected shortfalls.
Our nation urgently needs a debate about which federal programs are worth preserving or adopting and how and when we will pay for them. Our children and grandchildren deserve nothing less.
John O. Fox is a lawyer in Washington, D.C., who teaches a course at Mount Holyoke College, "Taxation and the Values of Democracy."