Political Animal

Deficits Forever

DEFICITS FOREVER….The OMB released new estimates for this year’s federal budget deficit today. Here’s the lead from the New York Times story:

The White House today projected a $455 billion budget deficit in the current fiscal year, by far the government’s largest deficit ever and $150 billion higher than what the administration predicted just five months ago.

This is followed by a torrent of figures showing that this deficit is one of the biggest ever. However, while the fact that OMB estimates have changed so drastically in only five months might be a bit disturbing, the size of the deficit really isn’t. In fact, considering the continuing flatness of the economy, a bigger deficit than expected is probably good news.

For the real news, you have to go to the Washington Post:

The federal government will pile up $1.9 trillion in new debt over the next five years and will still be running an annual deficit of $226 billion by 2008, long after White House economists assume current war costs have subsided and the economy has recovered, the Bush administration projected today.

….[The deficit] is expected to rise to $475 billion in fiscal year 2004, even without additional costs for the occupation of Iraq. The deficit is then expected to dip swiftly to $213 billion in 2007 before rising again in 2008, the last year of the White House forecast.

This is the real problem, especially since I assume that even these figures are based on the usual overoptimistic growth projections. By 2007 the economy should be booming and the government should be planning to run modest surpluses to cool things down a bit. Instead, it’s deficits forever, because seemingly nobody in this administration cares a whit about anything beyond the next election.

That’s the real problem. The Post got it right.

Parallel Lives

PARALLEL LIVES….I’m currently reading a biography of Henry Wallace, the New Deal acolyte who ran for president in 1948 on the short-lived Progressive Party ticket. Earlier in his career he was editor of a popular farm journal and Secretary of Agriculture for FDR.

Farming, which had been in crisis in America throughout the 1920s, became catastrophic during the Depression, and as Secretary of Agriculture Wallace was convinced that the only way to solve the crisis was to reduce output so that prices would rise. To do this, he implemented a (then radical) plan to pay farmers to take acreage out of production.

However, he was also a corn researcher (sort of a corn obsessive, actually), and was the original promoter of hybrid corn, an invention that boosted corn yields from 24 bushels per acre to 31 bushels per acre and eventually to over 100 bushels per acre. Hybrid corn was a wild success, and by 1999 the company that Wallace founded was purchased by DuPont for nearly $10 billion.

So Wallace the politician was dedicated to cutting farm output, while Wallace the businessman was dedicated to increasing yields. As the book finally notes on page 150, “He recognized the paradox. But he could never resolve it.”

It’s an interesting example of the way that we all compartmentalize our lives.