Last week, the White House Office of Management and Budget (OMB) announced a record $455 billion federal budget deficit for fiscal 2003. According to the Washington Post, the $455 billion deficit is “up sharply from $158 billion in the fiscal year that ended Sept. 30, 2002.” The $455 billion figure is a $602 billion ($602,000,000,000) difference from 2001 when President Bush took office. That year, the government posted a $127 billion budget surplus. According to last week’s estimates, the deficit is expected to reach $475 billion in fiscal year 2004, not including costs of the occupation of Iraq.
Of the record deficit, the new director of OMB, Joshua B. Bolten attributed 53 percent to the economic downturn, 24 percent to war, homeland security and other new programs, and 23 percent to the three successive tax cuts enacted since 2001. Republicans, however, were quick to say that the tax cuts will boost economic growth and ultimately shrink the deficit. “The tax cuts proposed by the president and enacted by Congress are not the problem,” said Bolten. “They are and will be part of the solution.”
However, according to Robert Greenstein, the executive director of the Center on Budget and Policy Priorities, the administration’s tax cuts have played a much larger role in the ballooning of the deficit: “Over 2003 and 2004, the cost of the tax cuts will be nearly three times as great as the combined cost of military operations and reconstruction in Iraq and Afghanistan, increased costs for homeland security, and rebuilding after September 11. In subsequent years, the cost of the tax cuts will surpass the costs of the war on terrorism by even larger margins.”
Federal Tax Cuts Mean Less Money for Education, Other Federal Obligations
Regardless of the impact that federal tax cuts have on the federal deficit, most agree that tax cuts have had a higher importance for the administration and the leadership in Congress than any other national priority. Many states, for example, accuse the federal government of giving tax cuts priority over its commitments to help states fund special education, the No Child Left Behind Act, health care, and homeland security.
As a result of decreasing federal funds, state governors and legislators, who are already facing the largest combined state budget shortfall since World War II, have to severely cut spending in almost every area. At the end of the line, local governments are forced to make voters choose between steep cuts in services or higher property taxes. According to the Washington Post, voters in Melrose, Mass., a suburb of Boston, recently refused a hike in property taxes. As a result, 35 teachers were laid off and class size had to be increased from 18 to 25 in elementary school, from 22 to 27 in middle school and from 22 to 30 in high school. In Fall River, Mass., the mayor and city council recently decided to raise property taxes 8 percent, or $335 per household, to cover the $3.3 million shortfall in the city’s budget.
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