Friday, January 12, 2007

Bush Doesn't Ask for Tax Increase for War

According to the Bloomberg Reports, George W. Bush, aka Bubble-Boy, is the first president in 150 years not to seek a tax increase to finance a war.(You can read the whole Bloomberg article by clicking on this entry's title.) This is going back to the Mexican-American war in the 1840s. All other presidents were smart enough to realize that you can't fight a war without a tax increase unless you are willing to go into debt. Now, the Republicans will try to argue that the national debt is going down. This is because the national debt doesn't count intra-governmental debt, ie, what the American government borrows from the Social Security trust fund to finance the government.

If Democrats wanted to go after Bush on the deficit, the first step would be to resurrect the lockbox concept that Al Gore talked about in 2000. This means passing a law that prohibits Social Security and Medicare funds from being used for anything other than those two programs. The immediate effect of this would be to illustrate how bad off the government finances are and to force reality into the debate about our government's spending and tax policies. It would also put the Bush administration into a real bind. They couldn't support such a move and opposing it would be politically unpopular. It would also reinforce the Democratic Congress's reputation as a defender of these two very popular programs.

4 comments:

John in IL said...

We aren't borrowing from the trust fund. Spending current surplus SS money increases the size of the trust fund.

John in Il said...

BTW, it is intragovernmental not intergovernmental. Two totally different things.

Team Member said...

Thank you for the correction on the word "intra-governmental". You are absolutely right. We disagree,though, on the effect of the borrowing from SS trust fund. What happens is that the government gives ious to the trust fund and then depends on future Congresses to make good on those promises. Bush and his allies then claim that the fund is in trouble because of the borrowing made necessary by his reckless taxcuts. The lockbox would take away this argument.

John in IL said...

" the government gives ious to the trust fund and then depends on future Congresses to make good on those promises"

That's what the trust fund is, government bonds. As the government spends SS money on other things besides SS, the trust fund increases.

My point is more a matter of clarification. The government can't borrow from the trust fund. The assets of trust fund (government bonds) are equaled by the liabilities of intragovernmental debt(those same government bonds). There is nothing there from which the government can borrow and never has been. You can say the government spends current SS surplus money and you think it should be saved in a lockbox, but it is incorrect to say the government borrows from the trust fund.