Jan. 21, 2005 — Q: If President Bush had not cut taxes in the first term what would the deficit look like today? With wars, without wars? — Rey Q, Anaheim Hills, Calif.
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A: With government math, it's hard to say. On the spending side, something like $200 billion has been authorized for the war in Iraq. While not all of that money has been spent, it’s pretty clear that Congress will have to come up more money for the war before U.S. troops come home.
As for tax cuts, one widely-cited figure put the cost of the Bush tax cuts at roughly $1 trillion over 10 years. But if the economy keeps growing, that number would be reduced as more taxes are collected. If the economy stumbles, tax receipts would shrink. So these projections aren’t all that useful. (On the bright side, there are enough different estimates out there now that you can choose whichever one gives you the answer you want to hear.)
Even without the war and tax cuts, it's very possible there would have been a mild deficit anyway. Much of the "Clinton surplus" was coming from unsustainable economic growth and capital gains taxes from a stock market that had lost its mind. And the Bush tax cuts have no doubt helped save the economy from a deeper recession that would have cut further into tax revenues.
One simple way to figure the budget impact of Bush’s first term is to look at how much new Treasury debt the government has sold to make up for the deficits since he took office. In Jan. 2001, the total Treasury debt held by the public stood at $3.9 trillion. As of Wed. Jan. 19, the figure was $4,423,975,930,565.56 (or $4.4 trillion.)So regardless of whether you attribute this increase to tax cuts or war spending (or both), the U.S. government is $500 billion further in debt after Bush's first term.
As for the second term, the outlook isn’t much better. A lot depends on whether tax cuts scheduled to expire at the end of the decade are made permanent -– and on when U.S. troops finally leave Iraq. Last June, the Congressional Budget Office estimated that the final bill for the war could hit nearly $400 billion. The CBO figures the accumulated federal budget deficits will hit $2.3 trillion by the end of the decade. And the White House’s own estimates for the second term estimates the total Treasury debt held by the public will reach $5.5 trillion by 2008. (See Table 20, bottom of the page.) That would put the accumulated price tag for both terms at around $1.6 trillion, or a little over $200 billion a year.
That's not counting the White House plan to overhaul Social Security. Until the details of the proposal are formally unveiled, it's impossible to say what it will cost. But if some payroll taxes are diverted to individual accounts (the main idea behind the plan), Congress would have to kick in more money to pay for people who are already retired or expect to do so soon. That could easily add another $1 trillion or more to the Bush deficits.
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