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Will the Deficit Hurt Bush?
Subject Politics and Economics
Topic Taxes, Spending, and Deficits
Key Words Deficits, Surplus, Economic Policy, and Politics
News Story

Most strategists on the national level agree, you cannot separate politics and economics. A clear example of that statement is emerging from a recent press release. With an election year approaching, the White House has projected that the budget deficit for 2003 will reach $455 billion dollars. This revelation has drawn quick parallels to the presidential election of 1992 when an independent candidate named Ross Perot attacked George Bush senior on this very issue. That attack may well have led to a democratic victory for Bill Clinton.

Democrat Howard Dean has called Bush, "…the most fiscally irresponsible president since Herbert Hoover." Senator Bob Graham of Florida, another presidential hopeful, describes the deficit as "…an economic dagger pointed at the backs of all Americans." Graham is presenting his own plan that would erase the deficit in five years by rolling back tax cuts for the wealthy which he claims will allow tax cuts for the middle class and still reduce the deficit. Democrats explain the rapid turn around from surplus under president Clinton to a deficit under Bush as a direct result of the president's tax-cut plan.

On the republican side, strategists are preparing a counterattack to convince the voters that the current deficit depends more on an economy that was hurt badly by the terrorist attack of September 11, and the two wars fought in Afghanistan and Iraq. They also argue that the current president is not disengaged from the economy, and understands full well the necessity of continued government support to finance the ongoing war on terrorism. Republicans will also be able to point to the spending side of the ledger where many of the current democratic presidential candidates supported the Bush spending programs.

Some analysts are suggesting that there is not much reason to expect voters to rush to the polls on the basis of the growing deficit. History shows, and recent polls have indicated, that voters interested in gauging the health of the economy are more likely to look at statistics on inflation, unemployment, and even the stock market before considering the deficit.


(Updated August 27, 2003)

Questions
1.

Discuss government borrowing versus new money as a way to finance a deficit.

2. Define and explain the notion of built in stabilizers
3. How would a balanced-budget law at the national level affect the deficit/political relationship?
Source Adam Nagourney, "Deficit offers Democrats Opportunity and Risk," Herald Tribune Online, July 18, 2003.

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