Fiscal Follies

But now, budget hawks say, the situation this time is much worse, in part because of the graying of America and the accompanying costs of Social Security and Medicare. Of course, there are other reasons, too.

“This is the worst of all possible times not to have control of our fiscal house,” Penny says. He’s unsettled that the nation is using debt financing to pay for the wars in Iraq and Afghanistan. “This is the first time we’ve been told to go to war on the heels of a tax cut,” he says.

Jay Kiedrowski, a former banker and Minnesota finance commissioner who now teaches at the University of Minnesota, shares Penny’s concerns. Kiedrowski says the federal budget outlook has darkened over the past year, largely because of the lower tax revenues due to the economic downturn and the costs of the wars.

President Bush started his administration with a budget surplus in 2001, but deficits have marked most of his tenure, and he failed to overhaul either Med-icare or Social Security. His final budget foresees a deficit of $410 billion for 2008 and steadily falling deficits turning to a $48 billion surplus in 2012.

Many budget observers beyond the White House view that forecast as far too rosy. Concord Coalition Executive Director Robert Bixby says “our fiscal outlook is deteriorating . . . large deficits are not going away anytime soon.” The coalition notes that the Bush forecast for 2012 includes $203 billion in revenue from the Social Security surplus, an off-budget pot of gold expected to swing into its own deficit position by 2013.

Bixby also notes that the Bush budget assumes that relief from the growing burden of the Alternative Minimum Tax will occur only in 2008, that nothing will be spent on the wars in Iraq and Afghanistan after 2009, and that substantial cuts will be made in Medicare physician payments.

Will the final two presidential candidates move the deficit issue to the top of their radar screens? That might not play well on the campaign trail. “Eight or 10 years ago, people were much more aware of this issue than today,” Whittlinger says. “This is really tough stuff. Right now, nobody’s making any noise about it.”

Well, not quite. Some politicians are concerned, and Walker certainly is. He harks back to the deficit-cutting 1990s as proof that the nation can bring its federal budget under control. If debate about the deficit continues to be submerged during the campaign, perhaps it won’t once the new president takes office.

Then, with the prospects of a deficit gone wild creeping ever closer, he figures Congress and the new president will be forced to deal with reality. “We did it before,” Walker says. “We can do it again.”