It's time for an honest fiscal conversation
Commentator and economist Glenn Hubbard
TEXT OF COMMENTARY
MARK AUSTIN THOMAS: Next week Congress is expected to take up President Bush's 2008 budget. Yesterday the Center on Budget and Policy Priorities says that budget would make deep cuts in education, environmental protection and law enforcement. The conventional wisdom is the budget is dead on arrival because Congress won't pass it. Although there are reasons to be critical, commentator Glenn Hubbard thinks the budget plan does have some good ideas.
GLENN HUBBARD: The president proposes to do what looks like the impossible: He wants to balance the budget by 2012, while increasing military spending and making his tax cuts permanent.
In part, the Alternative Minimum Tax will swallow more and more Americans. That'll cancel many tax cuts. And the administration's tax revenue assumptions are a tad optimistic, given the economic forecast.
Still, it would be a mistake not to crack open and scrutinize the charts and statistics of the four-volume budget.
The 2008 budget is now much clearer about the cost of military and Homeland Security spending.
For the first time, a complete tally of the cost of the war on terror is being presented up front: $145 billion for 2008 for the conflicts in Iraq and Afghanistan.
And the administration is explicit about wanting future increases in military spending. But every increase demands a decrease.
Many in the Congress will flinch at the President's proposals to reduce future spending on entitlement programs, but those programs account almost completely for the fiscal imbalance of the coming decades.
The budget proposes to ask high-income seniors to pay more for their Medicare coverage, and it would trim slightly automatic inflation adjustments.
Over the next 75 years, those reforms would reduce Medicare's unfunded liabilities by $8 trillion — the good news. Out of a total of $32 trillion — the bad news.
It's time for an honest fiscal conversation. The challenge is spending — and entitlement spending in particular.
The president's budget poses a challenging question: Can we restore fiscal discipline without damaging economic growth with higher taxes? And can we place a bigger burden of the spending adjustment on higher-income individuals?
The answer is yes.
THOMAS: Glenn Hubbard is a former head of President Bush's Council of Economic Advisors and Dean of Columbia's Graduate School of Business.