Platitudes are not economic policy. Ideological commitments are not policy. Warm fuzzy visions of healthy, wealthy futures are not policy. Belief in free markets and entrepreneurial spirits is ideological commitment and possible policy inspiration, but not policy. All of this is to say that we have really not heard much in the way of policy from the hordes of folks seeking the highest office in the land. As we brace for the long final stretch of election 2008, we have had the longest, most expensive, lowest content election cycle the world has ever seen. This makes my job here tricky. I have been honored by a request to cover the candidates' economic positions and policies over the coming months. I assure I will try to do so clearly and objectively. The task is complicated by a deafening silence in actual policy pronouncement -- most egregious among leading candidates. The unstated economic consensus seems to be, when it is broke, don't fix it.
I propose to inaugurate our discussion of those seeking inauguration by looking at where we are -- in policy terms.
The Wars in Afghanistan, Iraq and Against Terror
All leading candidates are committed to extending the war on terror. Few mention Afghanistan and so I will assume they are happy with that engagement -- or happily ignorant of how massively expensive and unsuccessful it is. Future Iraq planning is the point of departure. Some leading candidates seek rapid and complete withdraw, others favor further engagement and cost. Many offer "strong and strident" assurances of willingness to engage other nations militarily. I guess watching the recent string of successes it is hard not to embrace that policy. It remains possible that further conflict will be initiated prior to the end of this president's term. Martial threats against Iran recur with growing frequency.
War is a force that gives us debt.
Let's look at recent costs and projections of future spending. According to July 31, 2007 Congressional Budget Office (CBO) Testimony [i], we have directly appropriated and spent $602 billion on Iraq, Afghanistan and the war on terror. Spending has been rising quickly and must be assumed to stay elevated through 2009. If we reduce our Iraq presence to 30,000 and don't add any new wars -- dubious as several candidates have already announced their desire to win hearts and minds through bombing -- expect to spend approximately $500billion more through 2017. If we reduce only to 75,000 troops in Iraq we are told to expect to spend an additional $.8-.9trillion through 2017. These wars should be seen as economic decisions. I know they are not seen that way. That is simply a mistake. We have made -- leaving aside all other aspects and issues -- a minimum $700billion undertaking. Whatever we think of moral, human suffering, environment, popularity issues, we have allocated a huge part of our national wealth to this project -- now and into the future. We have funded this escapade with mountains of debt and will be paying for it for the next 30 years.
As we evaluate candidate positions on our many wars, we must consider the financial angle. After all, these wars are how many plan to spend our nation's sons, daughters, reputation and wealth. Wars are expensive, win or lose. The stresses and costs of war take decades to understand and spill forward through time. There is post traumatic stress disorder among service personnel. There is post conflict deficit, debt, tax and spending disorder.
Taxes and Spending
There are tax and spend Republicans and tax and spend Democrats, after all that is what governments do!
You may be surprised to see taxes and spending together. These two have been un-amicably divorced in American political discussion. That is insane. In the interest of budgetary family values I will be getting this couple's marriage back together. Like swans, taxation and spending policies are mated for life. Whomever you elect is projected to collect over $12.5trillion in tax revenues across the first term (2009-2012). [ii] He or she will honor you with a projected $13trillion in spending across his/her first term. This nicely assures you a $500billion projected 4 year total budget deficit. The next American president will preside over tax collection and spending flows so enormous that they will dwarf all but the few largest total national economies on earth. More will be collected and spent each year by the US Federal Government than the present local currency GDP of China. Thus, we should demand much more detail and engagement with economic policy.
So far we have learned that those running favor a robust economy with high employment, strong corporate profits and innovation galore. I am sure we will hear how much they all love America, their spouses and god. Moving and novel stuff. We have not heard or seen that much in the way of concrete plan. It appears that the better a candidate's poll numbers, the less specific information is shared. I suppose this should come as no surprise. There are some important trillion dollar differences emerging, nonetheless.
The first wrinkle of real importance arises around -- you guessed it -- tax and spending policy. The tax and spending projections above assume the end of the 2001 and 2003 Bush Tax cuts. The two leading Republican presidential candidates pledge to extend or make permanent these tax cuts. In that case, revenues will fall. Leading Republican positions on extension of the 2001 and 2003 Bush tax cuts will raise the 2008-2012 deficit by $440billion according the CBO. Unless very large cuts in spending are made, budget deficits will rapidly rise over projected levels and balloon after 2012. Most candidates indicate that they would like to index the Alternative Minimum Tax (AMT) to inflation. The AMT was designed to assure the Federal Government minimum tax revenue from higher income earners. Astonishingly, it was not indexed to inflation. The income level at which the AMT applies hits more and more Americans every year as inflation pushes up salaries over time. The AMT is hitting less and less affluent people each year. If our future president and Congress, work to index the AMT they will add $340billion to budget deficits from 2008-2012.
Over the next 14 months you should watch pronouncement on the Bush tax cuts and AMT tax reform. If there are phased out, taxes rise -- particularly for the higher income earners that disproportionately benefitted. If these cuts are extended we will have to have some combination of massive deficit increases and spending cuts. Just like war policy, there is a bottom line here.
National health and economic wealth
The twin scandals of rising health care cost and mass uncovered populations loom large. This will play a role in taxation and spending. Medicare costs have been growing much more rapidly than tax revenues and are eating more and more of the Federal Budget. Medicaid growth is much less rapid but, remains an issue. These costs threaten to further stress budgets creating the need for other program cuts, tax increases and/or rising budget deficits. Candidate health care proposals should be factored as essential national economic policy. If Medicare spending continues to increase at the recent rate it will massively worsen the fiscal condition of the US. We need a real policy debate.
The recent low budget deficits -- relative to the last few years -- are the product of boom times for taxable corporate earnings and incomes of the affluent. Neither is likely to stay so high for the next 5 years. Housing market and stock market booms always produce bulges in federal tax receipts. When they end -- NOW -- so does the unanticipated tax revenue. Candidates must provide and explain how they plan to address the 47 million without health insurance and the run-away inflation in health care costs. We now spend more than other industrialized countries, per person and as a percentage of GDP, and get less good health outcomes. Thus, our system costs more and delivers less. America's health, wealth, future and place in the world depend on change. We will be looking at health care proposals and their cost.
Economic Outlook
Candidates have yet to release detailed and specific economic programs. This process is just beginning and should accelerate across the coming months. As the economy slows and housing continues down creating loss, tears and anger, we expect rising economic concern. It is our considered opinion that US and global economic growth will not continue their recent unusually strong performance. This puts pressure on governments as services are requested and tax revenues fall. There will be many hard decisions as past deficit spending, expensive foreign policy blunders and wars lay claim to tax revenues. Our long deferred medical cost problems will loom extra large in this context.
As I examine the platforms and debates offered by the candidates I hope the above issues primer is of value.
that give them democracy stuff is fluff that the American people bought hook line and sinker but then they were naive enough to buy the fight the commies in Vietnam not over here so after 9/11 this was a breeze to sell this invasion.
war for profits big profits the American way.
god I love capitalism greatest economic system in the world even Condi admits that.
plus we get an action movie every night watching Iraqis being blown up.
yes a few soldiers get their legs blown off and a few die but heck many of them are illegals and those that are not. Losers baby losers the little people besides many of them got paid $20,000. now they must earn their money and kill a few or many Iraqis for all that oil. Can do without them they wont have any impact on my elitists status.
Lets cut to the chase we Americans are all true heroes for fighting this war. This oil will bring in profits and wealth for us few for generations to come.
Red white and blue onward Christian soldiers true heroes. We do Jesus proud very proud.
Signed
One proud evangel Christian and proud American from a red state.
But what's really amazing about our candidates is just how ignorant they are of that fact.
What if Democrats stated the obvious - George Bush has already raised our taxes?
He has, after all, essentially done that.
No matter how long it takes, we're going to have to pay a hell of a lot more in taxes so that the idiot can drive us closer to Armageddon.
Sooner or later, someone's going to pay for this mess.
And we know who that someone is.
So, in addition to making the economic connection of the war - I'd like to see them carry that connection home.
The idiot's war is bringing in big bucks to his friends and family. And he's lowered their taxes at the same time.
The rest of us will pay. That's the plan.
And that's why our taxes were essentially raised the day we invaded Iraq.
It's all a big game of pretend until the bill arrives.
But it's coming.