Nothing like diminished expectations

Some years ago one of my old teachers, Paul Krugman, wrote a book called The Age of Diminished Expectations. While not entirely apropos I couldn't help but think of that title after reading reports that the federal budget deficit this year might be $100 billion less than forecast. My favorite grafs from the article:

An improving [fiscal] picture could strengthen the political hands of the president and House Republican leaders as they wrangle with the Senate over more tax cuts and a budget blueprint for the fiscal year that begins Oct. 1. For weeks, the negotiations have been stalled, with a majority of the Senate demanding new procedural hurdles for further tax cutting and the House and White House steadfastly refusing. ... So far, House tax cutters have been undaunted by federal red ink. Last week, lawmakers in both parties voted overwhelmingly to make permanent Bush's tax cuts for married couples, a bill that would cost the Treasury $105 billion over 10 years. For the next three weeks, the House has scheduled successive votes on more tax cuts totaling hundreds of billions of dollars.[emphasis added]

Let's do a quick review here of the "improving picture."

• Last year the White House forecast a budget deficit this year of $521 billion, a record in nominal terms, although still short of, but nearing, the record (set by GHWB) in terms of percentage of GDP.
• For the same period, the nonpartisan Congressional Budget Office forecast a budget deficit of "only" $477 billion still a record in nominal terms.
• Reasonably insightful political commentators and economists (including, I believe, Paul Krugman) predicted that the White House had intentionally overestimated the deficit for the year, so that if it came in below their prediction they could trumpet the result for political effect in an election year.
• Above scenario comes to pass (although the final budget figures aren't in yet, nor the request for additional funds needed in Iraq) and our attention-span-of-a-gnat press happily plays straight man for the administration's propaganda.
• Bringing the exercise full circle, the administration and "house leadership" (why can't they just say Tom DeLay?) fall for their own spin and in a wave of self-delusion pursue policies that will greatly worsen our fiscal situation.

Let's be clear. There has been no measurably significant improvement in the nation's fiscal health. We are still running massive deficits that will, over time, erode our wealth as a nation and our standing in the world. This is what happens when idealogues control the levers of power. They are not responsive to facts or reason, but are driven by an idealized view of how things should be. Full of hope, they blindly pursue a course without regard to evidence they are on the wrong path. Each succeeding failure is met with the cry "We just have to stick with the plan." But reality always catches up with you. It has in Iraq, eventually it will in our fiscal health.