Oct. 1 marked the beginning of the new fiscal year for 2004. It should be a moment for all Americans to take stock of their fiscal future. The projected budget deficit, thanks partly to an unanticipated $87 billion bill for Iraq, is $600 billion. Add that to the fiscal 2003 deficit of $450 billion, and the U.S. will have to borrow more than $1 trillion just to cover the cost of two years' worth of federal government. The numbers are staggering -- and they're certain to grow. Yet the Bush Administration and Congress live in a fantasy land where choices don't have to be made, tax cuts have no limits, spending is unbounded, and policymakers expect a deus ex machina to rescue them.
Washington must end these fiscal fantasies. The worst is the supply-side canard that tax cuts pay for themselves through economic growth. The Congressional Budget Office, now run by a supply-sider, admits that it can't happen. Another is that rebuilding Iraq will be short, cheap, and shared. After the recent U.N. meeting, it is clear that the White House's unilateralism has left it isolated. U.S. taxpayers will bear the cost alone, possibly hundreds of billions of dollars. Another fantasy is that fiscal obligations to the baby boomers can be ignored. Unless choices are made, this generation will eventually draw down benefits equal to 8 1/2% of GDP annually for Medicare plus 7% of GDP for Social Security.
The final fantasy is that we are still living in an era of small government. The reality is that big government is back. Terrorism, conflicts abroad, an aging population, and restoration of business and financial confidence are expanding the role of government. Americans must come to grips with the need to pay for what only government can provide.
It is fortuitous that the 2004 fiscal year is beginning as the Presidential campaign is taking off. Everyone running for President should tell the American people how they plan to dig the country out of its deep fiscal crater.