To Fix Uncle Sam's Budget Do What Homeowners Do
CONGRESS, and now the president, are intent on eliminating the $1 trillion-plus deficit of the coming decade. Programs and benefits will be cut, subsidies abolished, and Cabinet departments shrunk or shut. But as they work to reconcile their differences - including how much of a tax cut to add to the mix - we should take a harder look at the ostensible ''gap'' they are striving to close.
The huge aggregate number is the product of two very different types of government spending: operating outlays and long-term capital investments. Our ''unified'' federal cash budget treats both as one-time, current costs. In so doing, we do not spread the cost of physical investments over their useful lives. As a result, the ''deficit'' picture is ''front loaded.'' We should restructure the federal budget into separate capital and operating categories so that the burden of capital spending is shared with each generation that will enjoy its benefits. Only then can spending cuts we make today in the name of our children be intelligent choices.
America's current ''stock'' of physical assets is estimated at $1.4 trillion. We will invest an additional $1.2 trillion over the next decade at the rate of $120 billion to $130 billion each year. Roads and bridges, airports, mass transit, railroads, housing, and office buildings have useful lives that extend far beyond the years when they are built. Spending for these purposes is far different from spending on consumable items like paper and pencils, or on entitlements. Because the budget treats both types of spending the same, we debit the full amount of all these expenditures in the current budget year. As a result, today's taxpayers are made to pay the full freight of tomorrow's physical plant even as they are asked to bear the brunt of all current spending cuts at the same time.