Newsweek‘s Allan Sloan wrote a column earlier this month about the deficit. The deficit, he said, is much, much worse than stated.

‘No,’ it’s not, you can hear the Bushies retorting.

‘Yes, it is.’

‘Is not!’

‘Is, too!’

So the question arises, whose math do you trust: Bush’s or Sloan’s?

Let me give you a hint: It was George W. Bush who, speaking of his planned tax cut, said, repeatedly . . . ‘by far, the vast majority of the help goes to the people at the bottom end of the economic ladder.’

That was a trillion-dollar lie. By far the vast majority of the help went to people at the top end of the economic ladder. And Bush simply had to have known it.

Even if – to be extraordinarily charitable – the President didn’t know he was lying when he first made this preposterous claim, would he not have asked one of his aides for clarification once he heard so many people respond that, in fact, more than half the benefit would go to the top 2%?

Even the dimmest of Harvard MBA’s – of whom I happily count myself one – know that if more than half of something goes to the top 2%, then ‘by far, the vast majority’ could not possibly, conceivably, mathematically or even hyperbolically, go to ‘the people at the bottom end of the economic ladder.’

I just don’t know how Bush supporters justify that lie.

(Well, I do know. They justify it like this: ‘Well, what about the blue dress!’ But do you know what? In the first place, any first-grader knows that two wrongs don’t make a right. In the second place, lying about a consensual affair is different from lying about a trillion dollars to improve the lot of the already best off.* And in the third place, President Clinton apologized.)

So in evaluating the budget deficit, how much should we trust President Bush’s assurance that everything will be just fine?

Sloan writes, in part (emphasis added):

By law, the budget office has to assume that existing laws expire as planned, and that no new programs are added or subtracted. But [its] report includes numbers that you can use to adjust for political reality. Which I did. First, I counted the $2.4 trillion Social Security surplus, which the Treasury uses to offset its cash shortfall. Then I figured that the last three years of tax cuts will become permanent; that Congress will pass a Medicare prescription-drug package and will also stop the dreaded alternative minimum tax from hitting 30 million taxpayers. These changes add $3.6 trillion to the deficit. So by the time you’re done, the total projected deficit is more than five times the aforementioned $1.4 trillion. Call it $7.4 trillion. And I’m being generous, assuming we spend nothing in Iraq starting Oct. 1, 2005. . . .

Normally, it’s easy to dismiss long-term budget projections because the biggest projected deficits (or surpluses) come in the last years, when the projections are the most unreliable. But here, the scariest numbers are the closest ones-the ones most likely to be reasonably accurate. For fiscal 2004, which starts in about 4 weeks, the budget office projects a $644 billion deficit. This would be 5.8 percent of the U.S. gross domestic product, which approaches the 6 percent record set by Ronald Reagan’s 1983 budget deficit. Reagan’s deficits set off alarm bells in Washington, he signed onto a huge tax increase and fiscal sanity made a comeback in Washington. Nothing of the sort seems likely these days, given the current administration and Congress. . . .

One savvy investor who shares Sloan’s concern is PIMCO’s Bill Gross. His September (‘What, WE Worry?’) and October (‘Clueless’) columns are scary – and well worth the read.

*Please don’t read this footnote if you are easily offended. But I cannot stop thinking of the Southern woman – it was particularly effective being delivered in a drawl by an attractive Neiman Marcus type – who had been thinking about the famous 16 words in the State of the Union address and, now, as she was discussing it with friends, purported to be perplexed as she tried to weigh their relative importance. She tilted her head in a question as she weighed two alternatives on her outstretched palms. ‘Blow job,’ she said slowly, pondering the significance as its weight caused her right palm to drop . . . ‘nuclear war.’ On ‘nuclear war’ her left palm dropped some as her right palm came back up. ‘Lying about a blow job . . .’ she repeated, dropping her right palm again . . . ‘lying about’ – well, you get the idea. And for ‘for nuclear war’ she might just as well have substituted ‘trillions of dollars.’


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