A Sea of Red Ink: Domestic and Foreign Checks

Reportedly, Republicans are balking at giving the White House a blank check to cover the costs to America's Gulf Coast caused by Hurricane Katrina. Sen. Conrad Burns (R-MT): "At least give us some idea" of how to cover the costs.

Not to beat the partisan drums too much, but who on the Republican side of the aisle asked these questions before heading into Iraq? Who asked these questions at budget time for Iraq, Year 2? Expenditures related to the Iraq war approach $200 billion and remain "off budget" -- ie, special appropriations.

Nevertheless, the question is a good one, if we include all programs financed by borrowing. And The Congressional Budge Office, in its 2006-2015 budget projection notes:

The absence of further appropriations for activities in Iraq and Afghanistan also masks a deterioration in budget projections over the 10 years in CBO's baseline... the total deficit projected for the 2005-2014 period has grown by more than $500 billion, or 0.3 percent of GDP. New legislation accounts for about three-quarters of that increase, most of it from recent laws that extend certain tax provisions and provide funding for disaster relief.

The Economic Policy Institute wrote in February that the federal debt "will grow in 10 years, by conservative estimates, to more than half the nation's total annual output."

Decisions to spend money we don't have -- that is money that we borrow from foreign governments (which buy our Treasury notes) -- should be discussed thoroughly and be in one of two categories: an emergency or an investment in the future. For example, expanded infrastructure can be compared to an individual deciding to buy a home. Borrowing (or making loans) to finance a college degree makes sense: the returns are expected to be greater than the costs over the long-term. And borrowing to pay for an emergency -- fire, theft, health -- is a rational decision.

Individuals living paycheck-to-paycheck "get" this -- as well as those who can put a little aside each month. Discretionary spending is discretionary. But neither this Congress nor this President "gets" that: From the libertarian Cato Institute report The Grand Old Spending Party:

... throughout the past 40 years, most presidents have cut or restrained lower-priority spending to make room for higher-priority spending. What is driving George W. Bush's budget bloat is a reversal of that trend.

The Libertarian Mises Institute warned of the dangers of an off-budget war in 2003:

It's finally dawning on commentators that the economy is in pretty sorry shape.... What's a government to do? Why, go to war, of course....Larry Lindsey, President Bush's former economic advisor, lowballed an estimate of $200 billion... For this, Lindsay was told to resign for having the political idiocy of stating such an astounding figure publicly, as though a healthy democracy does not need to know such confusing data.

Next month's Iraqi Follies, whatever billions they end up costing, are off-budget. After all, budgeting the war would hinder the ability of the political class to target new spending programs to areas of electoral importance, which is why the Bush budget allows the state to grow at an even faster clip than Lyndon Johnson dared.

And the conservative Heritage Foundation added, also in 2003:

• Government spending exceeded $20,000 per household for the first time since World War II,
• The federal budget expanded by $353 billion over its 1998 level,
• Defense and the attacks on September 11, 2001, accounted for less than half of all new spending since 2001,
• Mandatory spending reached its highest level in history, and
• Spending increased despite net interest costs plummeting by $110 billion.

Will the borrowing end with a whimper or a bang?

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Budget Deficit, FederalBudget, Iraq, Politics