Saturday, November 06, 2004

Whither America after November 2, 2004?

I had the opportunity to participate in a panel discussion with the same title as this post this morning. It was sponsored by the Institute for Lifelong Education at Dartmouth (ILEAD). My charge was to discuss the domestic policy challenges facing the Bush administration in its second term. A brief summary of those challenges was published in the Dartmouth faculty and staff paper:

On issues apart from the War on Terror, a second administration for President George W. Bush will be entirely about fiscal policy. The president has gained little traction on new initiatives outside of the budget, like education, job training, and immigration reform. He will need to achieve three fiscal policy objectives.

First: make good on his promise to cut the budget deficit in half between 2004 and 2009. If he doesn't do this, regardless of the circumstances (e.g., the war and inflation), then he validates criticisms of fiscal recklessness that will stick to his party. This objective limits the extent to which he can make his tax cuts permanent.

Second: achieve a bipartisan reform of Social Security that restores the program to long-term solvency. This was a campaign issue in 2000, and the subject of a pre-9/11 commission, but it has not progressed significantly since.

Third: recognize that the unfunded obligations of Medicare are even larger than those for Social Security. He also has to pursue structural reforms of Medicare that reduce its future claims on general revenues.


Jake said...

I think Bush will do all three of those things.

Anonymous said...

Given that the administration hasn't even acknowledged the disconnect between its policy proposals (making the tax cuts permanent, continuing operations in Iraq and Afghanistan, "reforming" Social Security, etc.) and its budget projections showing the deficit being cut in half (which assume *none* of these things happen) I'm amazed that anyone can seriously believe that the administration intends to keep its promise of cutting the deficit in half in four years. The only scenario I can see where that might be *possible* (and even in that scenario I don't think deficit reduction is likely) is if financial and currency markets force the issue. And the reason I think that cutting the deficit (from 2004 levels) is unlikely if the markets force the issue is because, at that point, interest rates will spike, increasing the cost of our trillions in debt and hurting the American economy (and, hence, the tax base).

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