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Tax Cuts and Consequences: Bush Budget Plan Will Require Steep Reductions in Real Spending Over Next Decade

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Abstract:

After years of hard political decisions and self-imposed fiscal discipline, the deficits that ballooned in the 1980s are gone. This is a key moment for America's budget policy. For the first time in over two decades, the country has the opportunity to make significant spending choices based upon a solid budget foundation. Will it be tax cuts, debt reduction, defense, investment, social needs, or some combination of the above?

The budget presented by President Bush makes one choice: it embraces a significant $1.6 trillion 10- year tax cut that significantly reduces the amounts available for debt reduction, new investments, social programs, and major changes in Medicare, Medicaid, and Social Security. Alternatively, his tax cut could force significant on-budget deficits, thereby repeating the cycle of the past 20 years.

The impact of Bush's choice will be felt be felt immediately by some programs and become more pronounced for others over the long term. Even education, a Bush priority that receives a significant boost in FY 2002, would suffer steady erosion from current service levels under the Bush plan.