Bush priorities: defence up, health down

From the Financial Times, 11-12 February 2006:

Bush puts stress on defence

President George W Bush outlined a $2,770bn (£1,592bn) annual budget calling for a 6.9 per cent increase in defence spending and a 3.3 per cent increase for homeland security.  The administration is seeking cuts in healthcare spending to keep plans to cut the fiscal deficit on track.

Citizens for Tax Justice, June 2002:   

A new study released today by Citizens for Tax Justice and the Children’s Defense Fund reveals for the first time who stands to benefit from the 2001-enacted Bush tax cuts in each year from 2001 through 2010. Among the key findings:

    * Over the ten-year period, the richest Americans—the best-off one percent—are slated to receive tax cuts totaling almost half a trillion dollars. The $477 billion in tax breaks the Bush administration has targeted to this elite group will average $342,000 each over the decade.

    * By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go just 1.4 million taxpayers.

    * Although the rich have already received a hefty down payment on their Bush tax cuts—averaging just under $12,000 each this year—80 percent of their windfall is scheduled to come from tax changes that won’t take effect until after this year, mostly from items that phase in after 2005.

    * In contrast, the vast majority of taxpayers have already received most of their tax cuts from the 2001 legislation.

Financial Times, 10 February 2006 :

US trade deficit balloons to record $726bn
By Christopher Swann in Washington
Published: February 10 2006 13:46

The US trade deficit ballooned to a record $726bn in 2005, inflated by surging imports from China and soaring energy prices.  In December the US imported $65.7bn more than it exported, up from $64.7bn in November. … [W]ith imports now almost 60 per cent larger than exports, American companies would have had to sell 3 per cent more abroad just to prevent the deficit from rising.  Over 2005, the deficit totalled 5.8 per cent of American national income. The current account deficit – a more inclusive measure that includes other income flows – was 6.5 per cent of national income.

Economists have long fretted that global investors will eventually become unwilling to finance the US deficit, without a fall in the dollar and a rise in US interest rates. So far, however, there has been no sign of demand for US assets weakening. Last year the dollar rose by 3.5 per cent on a trade weighted basis. But Nigel Gault, the head of US analysis at Global Insight, a consultancy, said the risks were increasing to the US economy as the deficit continued to widen. “An accident has been a possibility for some time and the further we go down this road the greater the chances that it will come to an unhappy end,” he said.

Comment is superfluous. 

Brian