HOW ABOUT A PEACETIME BUDGET:

Bush Team Prepares to Swing Budget Ax: The president says he will not raise taxes to keep his promise to cut the deficit. So what will take a hit? Medicare and Medicaid look likely. (Joel Havemann, December 26, 2004, LA Times)

For years, government has been about singling out winners for favored treatment in spending and tax policy. That era is about to end — and the change could be painful.

The budget surpluses of 1998 to 2001 enabled Washington to make funds available for such favored causes as domestic security, medical research and prescription drugs under Medicare. The government also slashed taxes for a variety of groups, including two-earner couples and the wealthy.

But the surpluses have turned into record deficits. President Bush is not about to take back his tax cuts, but in setting spending levels in the budget that he will deliver to Congress in the new year, he will single out a loser — perhaps several — for every winner. [...]

The Office of Management and Budget is measuring progress in Bush's pledge to cut the deficit not in its absolute size but in its size relative to the national economy.

Thus, the budget office says, Bush must cut the deficit from 4.5% of U.S. economic output — its level in fiscal year 2004 as estimated a year ago — to 2.25% in fiscal year 2009.

A quick tour of the government spending landscape shows a terrain inhospitable to budget cutters.

Roughly, federal outlays can be divided into five equal pieces. One slice is Social Security, which has been politically off-limits to budget cutters since 1983. A second contains Medicare and Medicaid, which also have resisted cuts.

The government's other support programs — food stamps, unemployment compensation and others — go in a third piece, as do interest payments on the debt. Interest payments are outside Congress' control, and other support programs are politically as well as technically difficult to adjust.

The other two pieces of the budget are easier to manipulate in the short term. One of them consists of defense and domestic security, where the Bush administration has until recently shown no tendency to skimp.

So most of the pressure to cut spending lands on the final fifth of the budget — the so-called domestic discretionary programs. These consist of a wide variety of projects, such as an abandoned mine reclamation fund and a zero-down mortgage program run by the Department of Housing and Urban Development.

Even eliminating this category of spending would not have balanced the 2004 budget.

"If they don't put entitlements or tax cuts on the table, they'll get nowhere," said Robert Bixby, executive director of the Concord Coalition, a budget watchdog group. "No matter how tight the spending is in the areas they're willing to clamp down on, they're not going to get very far."

This much Bush has made clear over and over again: He will not raise taxes in order to keep his promise to cut the deficit. He has said he has two major tax goals for his second term: making the temporary tax cuts of his first term permanent, and simplifying the tax code.

Bush's tax cuts have contributed to a sharp reduction in revenue as a share of the U.S. economy. In fiscal year 2004, which ended in September, the government took 16.2% of the nation's economic output, its lowest level since 1959.

With al Qaeda neutralized and elections coming next month in Iraq, it's time to gut defense again.

Posted by Orrin Judd at December 26, 2004 9:57 AM