Deficit Politics

Last week, the White House announced that the deficit for fiscal 2007 was $163 billion, or about 1.2 percent of GDP. The 40-year average is 2.4 percent. Over the last three years, the deficit has dropped about $250 billion.

We are in the middle of a fairly expensive war, probably per capita one of the most expensive wars in our nation’s history. And yet, our deficit is well below the historic average.

Remarkable.

Included in these calculations is an expensive Medicare prescription drug benefit, higher Social Security costs and assorted other spending increases.

Yet, tax revenues are up because the economy has been resilient and fairly strong.

The White House won’t get any credit for this amazing story. That is the nature of entering the final year of a two-term presidency. But the fact is that the president’s tax cuts have worked in the face of many challenges.

Democrats look at these numbers and think two things. Tax and then spend.

They believe that the American people aren’t taxed enough. And they have proposed a variety of ways to “raise revenue” in this Congress. They believe that Wall street needs to be taxed more, farmers need to be taxed more, smokers need to be taxed more, drivers need to be taxed more, small-business owners need to be taxed more.

And then they believe that there needs to be more spending. From healthcare to education to other programs that they have sprinkled throughout the government, the Democrats have a spending plan that fits the needs of every one of their special interest groups.

The first baby boomer signed up for Social Security yesterday, signaling the start of a long-awaited flurry of deficit angst.

Deficit politics is going to get real interesting in the next couple of decades, thanks to the entitled baby boomers.

I think we should be looking at small adjustments that lead to bigger savings for the next generation, not at dramatic “reform” that scares the hell out of the most powerful interest group known to politics — senior citizens.

President Bush’s campaign style approach to social security reform was a complete dud in the last Congress, but his heart was in the right place.  The Democrats have their heads on the sand on the issue of entitlement reform.

These new deficit numbers show that we are going in the right direction when it comes to getting our fiscal house in order. And that is the good news. The bad news is that without some common-sense adjustments to entitlements, we can be in a world of hurt in 30 years.