And pigs will fly

You know the feeling you get when your darned checkbook just won't seem to balance. Multiply by a few zillions, and you have some idea of the way Washington is running things these days. It's not just a nightmare; it's that old familiar nightmare we thought we had shaken off years ago: A ballooning federal deficit and its evil twin, a widening trade gap, threaten the U.S. dollar, our financial markets, and our monetary policy. For the first time since 1997, our budget this year will show a deficit probably in excess of $160 billion, in sharp contrast with a $127 billion surplus last year. This dizzying swing–$287 billion–is the largest on record.


Why the big change? The drop in tax revenue this year, of over $130 billion, is the sharpest in 56 years, much of it due to layoffs, pay cuts, pay freezes, fewer exercised stock options, and a fall in capital gains. What's more, the reduction of tax rates for upper-income households enacted last year means that when the economy does finally pick up steam, Washington won't see a commensurate pickup in tax revenue.

The projected 10-year federal budget surplus had already shrunk by nearly 95 percent, from $5.6 trillion to $336 billion. But even that number is wildly overoptimistic. It doesn't include the costs of a prescription drug program for seniors, estimated to cost at least $300 billion over the next decade. It also doesn't include appropriate costs for military and homeland defense spending. And it assumes that discretionary spending will rise at the rate of inflation, a pipe dream. If government spending continues to increase at its current rate of 8.5 percent, we will add an additional $2.9 trillion in debt over the next decade.

Spree. Think it won't happen? Just look at discretionary spending this year. It's up by almost 14 percent, the biggest government spending spree in a generation. In fact, for the first time in over 30 years, annually appropriated programs controlled by Congress and the president have grown faster than formula-driven entitlement programs like Social Security and Medicare. Only a third of the entire $91 billion increase in annually appropriated funds has been spent on homeland security and national defense; the rest goes for everything from highway construction to farm subsidies.