Wednesday, February 08, 2006

Cooking the books

The 2007 budget proposed by God-King Bush is a thing of beauty. It contains no funding for Iraq or Afghanistan after 2007, it ignores the necessity of reforming the AMT (which will reduce revenues but help the middle class) and it ignores the costs of extending the existing tax cuts, any costs of reforming Medicare or Social Security, it cuts funding for key social programs, and even with all that book cooking, we've still got a massive deficit.

Every year the White House says the deficit will be enormous, then they get to crow about how it's actually just gigantic. The President cheers "We've now cut the rate of growth in non-security discretionary spending each year I've been in office." That's right, cutting the rate of growth, not the spending. The spending has still grown.

But everyone does that stuff, right?
And it turns out, President Clinton cooked the books too:

It was in no small part because the budget Clinton presented to Congress in February 1993 – originally advertised as cutting the deficit by $473 billion over five years -- lacked such smoke, mirrors, and obfuscation that surprised bond traders immediately responded with enthusiasm and interest rates fell significantly. (The bond market rally amounted to more than 150 basis points from January to October of 1993). As Alan Blinder and Janet Yellen recounted in The Fabulous Decade: Macroeconomic Lessons from the 1990s, the Clinton administration actually “cooked the books” against itself by basing its forecasts on Congressional Budget Office projections that were more pessimistic than its own. That raised the level of projected future deficits and reduced the projected savings from his plan, but it also enhanced the credibility of the administration’s deficit-reduction efforts.
A government with credibility? What a strange concept. A government that earns market confidence by making cautious assessments of future economic changes. An economy that brings all boats up, not just the yachts.

Good times.

The Bush administration, for the first time in decades, is reducing the number of people covered by Medicaid. It isn't that the people kicked out will be covered by a different insurance program, or that they got so rich that they no longer qualify. There just won't be money in the budget to cover everyone who's eligible.

Governor Sebelius explains the problem:

Over 10 percent of Kansans rely on Medicaid for essential medical care, for nursing home care, for pharmaceutical care and $10 billion is not an insignificant amount to cut out of the care of our neediest citizens. It will make insurance for all of us more difficult to obtain. And I think while we're eager to come to the table and have a discussion on fixes for Medicaid over the long run, we hate to do that with a budget number already chosen, and that will drive the discussion as opposed to a policy-driven discussion.
That was last May, when the same cuts were on the table. Congress rejected them then. There has been no policy discussion since then, this is still just a number pulled out of a hat, and it punishes states that have already reformed their Medicaid programs.

Kansas has seen deficits turn into a surplus, without cutting essential services or major tax hikes. The State Budget Director explains how: increased efficiency, including more energy efficiency, smart fiscal policy that grows the non-government workforce. As Director Goossen explains "We are obligated to take a business-like approach to running government, and that’s just what we have done."

Nationally, all the job growth has been a result of government spending. But Kansas hasn't spent its way out of deficits. Governor Sebelius had teams sit down and carefully review every government program, look at what it does and how it does it. Programs that didn't do anything were cut, and programs that could work more efficiently were reformed, then had their budgets reduced. Unneeded state-owned cars were sold, and there was a freeze on new car purchases. Procurement policies were streamlined.

These are simple things, but they add up to real money. A lot of people were skeptical that Sebelius could keep her promise to prevent cuts to education funding without massive tax increases, but she did it. And she did it by starting with a policy discussion and using the policy decisions to dictate the funding. Just what she's begging the feds to do.

Perhaps one day that sort of sensible leadership will return to the national government.

Meanwhile, we'll slow the growth of the deficit by cutting $255 payments to the spouses of Social Security beneficiaries. Brilliant.