If you are worried about the federal deficit (and you should be), ask yourself which would do more to improve the country's finances—President Bush's latest budget or a pastrami sandwich. The administration made much of the fact that the budget Bush proposed in February was his tightest yet and was projected to reduce the deficit by half, to $207 billion, in 2010. What the administration did not make much of—you had to look deep in the fine print—is that the deficit would actually decline a bit more between now and 2010 if the Bush plan were not enacted and existing laws were just left alone.
In other words, go with the pastrami. It is fiscally sounder, plus it's good with mustard and a dill pickle.
Bush is a risk taker, and nowhere is his audacity more pronounced than in his willingness to tolerate large deficits in order to achieve other aims. He came to office looking at a budget surplus of $5.6 trillion over ten years, and converted it into deficits that will amount to something like $2.6 trillion over those ten years. However one feels about this, it was one of the largest fiscal dislocations in modern American history.
How should one feel about it? Not happy, of course. Enormous deficits pose significant risks. As many economists see it, the economy's main long-term vulnerability is the combination of negative government saving—that is, deficits—and low private saving, which together make the United States dependent on foreign capital. Eventually the imbalance will have to be corrected, and as James Fallows shows elsewhere in this issue, an abrupt correction could be depressing in both the economic and emotional senses of the word.
Yet some risks are worth taking. There are worse things in life than deficits. One way to evaluate Bush's policies is by asking which president he will end up most closely resembling—Ronald Reagan or Richard Nixon.
In the half century before Bush, the United States had already experienced two great fiscal dislocations. The second and better known occurred during the early 1980s, when Reagan raised defense spending and cut taxes. The deficit soon reached six percent of GDP, a level since unmatched. Good-government types—I confess I was one of them—decried Reagan's deficits as the height of recklessness. Then the Soviet Union collapsed. Many people, and not just Reaganites, have plausibly argued that Reagan's defense buildup played a leading role in pushing the Soviet regime over the edge. If that's true, then in hindsight the Reagan deficits look like money well spent.
Where deficit spending is concerned, Bush outdoes Reagan. He nearly doubled the Department of Education's budget, approved an expansion of Medicare that added $17 trillion to the program's already staggering ($45 trillion) unfunded liability, and has spent more than $200 billion on Iraq and Afghanistan and other elements of the war on terror.
Of course, Bush and other Republicans argue that they are investing, not just spending. They will tell you the education money bought a national regime of testing and standards that will improve American schools. They say the Medicare spending bought some structural innovations—notably personal health savings accounts—that could lay the groundwork for a more rational, market-oriented health-care system. Yes, the Iraq War and its aftermath are expensive (and money is the least of it); but the administration hopes to buy a new, more democratic social order in the Arab world.