What are the Bush Administration's economic priorities?

Under the headline Treasury Nominee Gives Few Specifics on Bush Priorities, the New York Times reports on nominee for Secretary of Treasury Henry Paulson's testimony before the Senate Finance Committee:

Mr. Paulson reiterated Mr. Bush's general views on the need for low taxes, budget restraint, increased American competitiveness and the use of persuasion rather than threats in dealing with China on economic issues.

But Mr. Paulson, the chairman of Goldman Sachs, carefully avoided specifics on most policy issues or any mention of prospects for reviving some of Mr. Bush's economic goals — like overhauling the income tax — that have languished for the last two years.

"Having good ideas is one thing," Mr. Paulson said in response to questions about a tax overhaul. "Having good ideas that are doable is another thing."

... Mr. Paulson stuck to generalities: keeping taxes low, maintaining flexibility in the capital markets, fighting a "creeping regulatory expansion," addressing an anticipated surge of spending on Social Security and Medicare as the nation's baby boomers enter retirement, and improving competitiveness in world markets.

He also alluded at least twice to the limited time left — two and a half years — in Mr. Bush's presidency.

Much like his predecessor, Mr. Paulson rebuffed calls for trimming some of Mr. Bush's tax cuts to reduce the deficit.

"I think it would be a big mistake to increase taxes," he told Senator Olympia J. Snowe, Republican of Maine, adding that the deficit, which is hovering around $300 billion a year, is "within the realm of historical norms" as a share of the gross domestic product.

I'm kind of astonished that six years into the Bush presidency, I don't know - and the Senate Finance Committee does not know, and Bush's nominee for Treasury secretary does not know - what the Bush administration's main economic priorities are.

Let's look at the clues Paulson gives us. By "keep taxes low", he means make the 2001 tax cuts permanent. That is, Bush is still fighting the battle over his single major economic accomplishment, achieved in the first six months of his administration. "Maintaining flexibility in the capital markets" must be code for preventing a major meltdown in financial markets caused by the huge US trade and budget deficits. I wonder what Paulson means by "fighting a 'creeping regulatory expansion'." Republicans, last I checked, controlled the presidency and both houses of Congress. What is this creeping regulatory expansion, and who are the creeps? Addressing the surge in Social Security and Medicare spending is odd - first, the surge isn't going to occur until Bush is out of office, second, his major initiative in this area - private accounts for Social Security - was dropped like a hot potato last year, and third, the best way to prepare for a surge in these expenditures is to reduce the non-Social Security, non-Medicare budget deficit, which apparently is explicitly not a priority of this administration - see below. What is "improving competitiveness in world markets?" It's support for free trade (but I don't know of any major trade agreements coming down the pike), or perhaps trying to get the Chinese to devalue their currency.

If I were a conservative Republican administration, I'd have some actual priorities. (1) smaller budget deficit accomplished by spending cuts. (2) a deal on Social Security that would involve personal accounts, but not as radical as the plan that failed to gain traction last year. (3) tax reform that would simplify the tax code and promote growth, while locking in at least some of the 2001 tax cuts. I'd probably have to throw up my hands on Medicare - let the next (Democratic) president handle that one.

But astonishingly, reducing the budget deficit - even through spending cuts - does not appear to be on the list of priorities that Paulson was authorized to talk about. Paulson is right that $300 billion is around the historical norm (as a percent of GDP), historical being the period from around 1970-1997. But during that period the budget deficit was considered a huge problem. The existence of the budget deficit defined the terrain of all debates over fiscal policy. Fighting the budget deficit was a crusade fought - for most of the period - by conservatives. Conservatives in Congress are constantly calling for spending cuts to reduce the deficit. The Bush Administration, however, has defined deviancy downwards. It has bailed. Dealing with the budget deficit (like the war in Iraq) will be the next administration's problem, magnified by the onslaught of retiring baby boomers.