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fixing it: Repairing some of the worst Bush administration screw-ups.

Fiscal PolicyFully account for the budget, stick to the budget, and work with the other party.

By Jason Furman
Posted Friday, April 4, 2008, at 7:35 AM ET

With President Bush's approval rating hovering in the 30s, just about everyone has an opinion on what he has done wrong in the past seven years. But not everyone can explain what the next president must do to fix it. So we've called in some experts to tell us. Fixing It is a 10-part series to be published over the course of the week by some of our favorite writers, offering detailed policy prescriptions for the next president, whoever that may be, on how to quickly undo some of the damage that's been wrought. One of our contributors wryly describes the series as "News You Can Use. If You Happen To Be President." Read the other entries here.

The fiscal damage to the United States over the last seven years is calculable. It is precisely $3,889,136,064,463, according to the Bush administration's Office of Management and Budget, which totaled up the budgetary cost to date of all the tax cuts and spending increases enacted over the past seven years. Of that nearly $4 trillion total, the administration estimates that 46 percent is tax cuts, 31 percent is defense and homeland-security spending, and 23 percent is everything else, including the prescription-drug benefit.

Even if the next president repealed the tax cuts, canceled the prescription-drug benefit, and returned defense spending to prewar levels, the added debt from eight years of these policies would not vanish—and we would be left paying roughly $100 billion annually just in added interest. Fully fixing it could take years or even decades. Here is how the next administration could at least start us down that path:

Fix-it List: Fiscal Policy.

Step 1: Fully account for all costs in the budget. While it will take a long time to dig ourselves out of the current budgetary mess, quantifying the exact size of the mess should be the first order of budgetary business in the next administration. Budget documents have become increasingly detached from reality. Year after year, we are "surprised" by the large budgetary costs. In February 2006, for example, the president submitted a budget with $485 billion of defense funding for 2008. Just two years later, 2008 has arrived and the president's budget is now requesting $693 billion for the same year. That whopping $208 billion underestimate of defense spending in 2008 exceeds total spending on the wars in Iraq and Afghanistan this year. That same February 2006 budget called for precisely $0 in relief from the Alternative Minimum Tax in 2008, compared with the $60 billion actually being spent on such relief.

The next administration could unilaterally end this practice by including all future costs in their budget. Ideally, the budget would specify how the costs would be paid for as well. But if that is too much to hope for, I would still rather see the budget admit that AMT relief will cost money than pretend that it will be paid for in some unspecified manner.

Such a step would be in the new administration's interest because it would increase the projected deficit, a problem they could fairly claim they inherited from their predecessors. And starting from this point would make it easier for them to claim any progress in fixing the problems.

Step 2: Stick to these costs, with a veto pen if necessary. The next president can draw up a budget on his or her own. But any actual spending or tax decisions need to be passed by Congress. The president has only a limited ability to pressure Congress into raising taxes or cutting spending in order to reduce the deficit. But he or she can draw a firm line and promise to veto any legislation that raises the deficit. And if Congress continues to largely abide by this principle, as it has since Democrats took control in 2007, then the process will be that much easier.

This would not preclude putting universal health care first on the agenda, as Ezra Klein wisely suggests, but it does require that one of the principles underlying this priority be that it is fully paid for without increasing the deficit.

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Jason Furman is a senior fellow and director of the Hamilton Project at the Brookings Institution.
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