The 7-Year Goal is Baloney

There is a simple solution to the budget impasse: Let the president and Congress declare that by the year 2002, all the poor in the United States will be healthy or rich, and nobody will have any further need for Medicaid. By taking Medicaid off the budget for the year 2002, they will have it more than balanced by anybody’s scoring.

This sounds silly, but it’s no sillier than the flock of assumptions the budgetmakers offer as justification for thier present positions. The obvious truth of the matter is that nobody knows what the economy will be like seven years hence.

Even much looking backward, our statistics aren’t much good: Every year we revise historical figures on matters like gross domestic product, trade balance, employment levels and cost of living. Princeton economist Fritz Machlup studied the seven years of fluctuations in official estimates of the U.S. balance of trade for 1951, which ranged from a positive $5 billion to a negative $800 million. Machlup said the changes in “supposedly empirical data” grew out of “complaints by disappointed businessmen, apologies and alibis by frustrated governments [and] primitive interpretations by newsmen and journalists on the basis of uninstructed theorizing by the man-in-the-street.”

Looking forward seven years, we’re lucky if our median estimates are less than 3% off, cumulatively. The probable error in estimates from the Congressional Budget Office or the Office of Management and Budget over a seven-year period is at least half a trillion dollars one way or the other, about four times the “difference” that supposedly separated the White House and the congressional leadership in the current negotiations.

Worse, no Congress can commit another Congress. Projected appropriations for later years do not have the force of law. Whatever budget cutting or tax cutting is done this year can be reversed (or, indeed, enhanced) at any time. Gramm-Rudman-Hollings in 1985 was much like this year’s budget plan, setting a “glide path” to a balanced budget—in 1991.

These “balanced budgets” for future years are a kind of video game to which politicians and commentators become addicted. In the real world, the only thing that matters is what next year’s budget provides. Regardless of this year’s budget resolutions, next year’s budget will provide the baseline for work on the budget for the year after next, and so on ad infinitum.

Next year’s budget, as it happens, on both congressional and White House assumptions, will produce a larger deficit than did last year’s budget. Maybe a lot larger if the economy slows. And the Republicans’ budget for fiscal 1997, on the Congressional Budget Office “scoring” that they find so essential, shows a deficit larger still. The famous “balance” is seven years away, to be achieved by future Congresses.

Conspiracy theorists might find it easy to believe that the advertised plans to balance the budget in 2002 are really just a way for politicians to cover their rear ends against the public’s discovery that the only budgets they really control show rising deficits.

Worse yet: Both the congressional and the presidential budgets call for an unacknowledged theft of $150 billion from the Social Security trust fund to make the budget numbers “balance” in 2002. By taking the temporary Social Security surplus into government revenues, we keep Social Security on a discredited “pay as you go” basis. And that means that we are planning for enormous deficits when the baby boomers start retiring a decade thereafter.

There are of course real decisions about real programs embedded in this quarrel, but they are not the subjects of discussion. We are trivializing our political discourse to create meaningless scenarios easily digestible by the consumers of media. The satirist Eugene Field wrote in the 19th century that Charles Kean’s performance of Hamlet was “funny without being vulgar.” The long-running theater in Washington is vulgar without being funny. The world’s only superpower should not present such kitsch to the world.