What's the new president - - Republican or Democrat -- likely to face after taking the oath of office in 2009?Daunting fiscal problems -- and right at a time when Congress may have to consider more fiscal stimulus to jump-start the U.S. economy, one economist observed.
The biggest problem, economist Glen Langan said, will be the federal government's budget deficit. The United States is on-track to record a $200 billion deficit in Fiscal 2009 and a $241 billion in Fiscal 2010 -- and that's if the U.S. economy doesn't fall into a recession, Langan said, citing Congressional Budget Office data.
"The baseline CBO projections present a large budgetary task for the new president, but by itself it's not an impossible one, absent a major recession. The problem is there's no money available to tackle any other problems, including ones a Democratic president would address -- health care, energy policy, education and infrastructure. And don't forget the Iraq War, anti-terrorism efforts, and potential mortgage assistance programs," Langan said. "If there aren't changes to the tax code, given the current revenue structure and tax rates,to say the next president's hands are tied regarding new programs, would be an understatement."
What caused the revenue shortfall? Well, as my BloggingStocks colleague Peter Cohan outlined in an earlier analysis, President Bush's $1.3 trillion worth of tax cuts amid a time of increased defense spending and related costs are the primary reason. True, the tax cut may have increased incentives to invest, but the cuts weren't broad-based enough to stimulate the economy in a sustained way, economist Langan noted, "and the result is a line of red ink, for years."
What's the solution? Langan said that given entitlement spending and defense commitments, it will have to be a tax increase - - and that's without increased spending to address the aforementioned health care and mortgage problems. Add those programs in and "an even larger tax increase would be needed," he said.
But don't look for a Republican president, even a moderate like Sen. John McCain, R-Arizona, to increase taxes, and certainly not on his political base - - high-income and upper-middle-income Americans. McCain has repeatedly said he will oppose any increase in marginal tax rates. That leaves the heavy lifting to be done by a potential Democratic president, Sen. Barack Obama, D-Illinois, or Sen. Hillary Clinton, D-New York.
"So one of President Bush's legacies will be having the new president face the prospect of raising taxes just to get back to where we were fiscally, before his tax cuts. Or, raising taxes even more to address the deficit and new concerns. That's not exactly the most constructive 'welcome wagon' gift," Langan said. "It's a daunting task, and I don't envy the new president."
Financial Editor Joseph Lazzaro is writing a book on the U.S. Presidency and the U.S. economy.
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Reader Comments (Page 1 of 1)
2-25-2008 @ 5:55PM
bob sakamano said...
i think they could have saved a lot of money by just publishing a pdf copy of this online instead of printing actual ones
2-26-2008 @ 12:26AM
David said...
Has this every been addressed to any running and if so who has asked how they'll over come it? It hasn't been in any debates that I've seen.
2-26-2008 @ 7:02AM
Ski said...
Are you kidding me. This is typical of The George Bush legacy. Everything he touched from the time he was a Child has been a bust except for being elected Governor and president. Then everyone and everything around him starts falling apart. He and his family are like a plague on the world.
Look at his oil company, it went belly up. He almost drove the Texas Rangers Baseball team into bankruptcy and that's hard to do in Texas.