Politicians are to blame for gloomy fiscal outlook

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If there was any doubt that Washington politicians live in an unreal world, their latest efforts to cope with the government’s finances should lay that to rest.

Exhibit 1: The $109 billion “emergency” spending bill that President Bush has threatened to veto, even though a majority of the funds are for fighting the wars in Iraq and Afghanistan.

Exhibit 2: The latest Republican effort to extend lower tax rates on capital gains and dividends while protecting 15 million middle-class taxpayers from a tax intended to ensure wealthy Americans pay their share.

Bush and GOP congressional leaders are trying to pass both the spending and tax measures for this year even though the bills are likely to increase current and future federal deficits. They’re also trying – without success so far – to pass a budget for next year that limits spending.

The entire mess illustrates the haphazard way the federal government conducts its budgetary business as well as the mockery that Mr. Bush and the Republican Congress have made of the fiscal responsibility that was once a GOP governmental hallmark.

It’s becoming ever harder to know where federal budgeting stands. Bush and GOP leaders say they’re on track to cut the deficit in half by 2009, while budget analysts say the long-term outlook is as gloomy as ever.

Both may be correct. The strong economy may produce enough extra revenue to cut the short-term deficit. But extending the Bush tax cuts – while the costs of retirement and health programs rise – ensures it will explode again in the post-Bush era.

The fact that so much of the outlay for the war and such things as Hurricane Katrina is included in a supplemental measure allegedly for unforeseen emergencies is, in itself, revealing.

Since before the Iraq war began, the administration has withheld much of its planned war funding from the regular budget.

So when the White House and Congress hailed themselves last December for restraining spending in regular funding measures, they knew they’d have to vote extra money later for Iraq.

But the Senate was not content to limit itself to the administration’s request for the war – as well as for hurricane relief, border security and pandemic flu preparation. It larded the bill with billions in special unbudgeted projects.

The House, beginning to show some sensitivity to federal overspending as its members prepare to face voters, is balking. So is the White House, with Bush vowing to cast his first-ever veto after more than five years of acquiescing in Congress’ inability to exercise fiscal self-restraint.

Meanwhile, the White House and GOP congressional leaders agreed this week on a renewed effort to benefit upper-income taxpayers by continuing reduced taxes on capital gains and dividend income that are scheduled to expire at the end of 2008.

They included this in a bill to protect middle-class taxpayers from the alternative minimum tax, which is designed to limit the extent to which upper-income taxpayers can avoid taxes through loopholes.

Even some Republicans said the bill would offset December’s savings and swell future deficits.

Carl P. Leubsdorf is Washington bureau chief of the Dallas Morning News. Readers may write to him at the Dallas Morning News Washington bureau, 1325 G Street NW, Suite 250, Washington, D.C. 20005, or via e-mail at: cleubsdorfdallasnews.com.

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