Although being a budget watchdog generally requires a healthy dose of
skepticism, recent months have provided reasons for cautious optimism. The
sticker shock associated with the costs of responding to Hurricane Katrina on top
of large structural deficits appears to have made the nation’s fiscal health a higher
priority for policymakers and the public.
After four years of tax cuts and spending increases enacted with little concern for
their budgetary impact, talk of budget offsets has returned to the legislative
process. Congress is on the verge of enacting greater spending cuts than the
budget resolution required, while it deferred completing action on tax cuts before
adjourning.
In addition to Congress nearing completion of the first deficit reduction
reconciliation bill in eight years, various proposals have been put forward by
members of Congress and others outside Congress for even greater savings. At
the same time, the prospects of further tax cuts are in doubt as members who have
supported tax cuts in the past question whether the federal government can
continue to reduce revenue in light of our fiscal situation. Meanwhile, it now
appears that the costs of responding to Hurricane Katrina will be less than the
original estimates of $200 billion.
To be sure, there remains considerable pressure for additional tax cuts and
increased spending, and the costs of tax cuts and spending increases on the
legislative agenda when Congress returns next month exceed the modest deficit
reduction efforts that have been made. The calls for austerity to pay for the costs
of hurricane relief would have greater credibility if this principle were applied to
other areas of the budget as well. But at least the inevitable political pressure for
tax cuts and spending increases is being counterbalanced by a concern about the
deficit. We are hopeful that the increased attention that the deficit has received in
recent weeks represents a shift in the public discourse that will lead to serious
deficit reduction efforts in the near future.
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