Bush, Gore plans carve into surplus; Presidential hopefuls' proposals outstrip revenue projections; $893 billion available; Campaigns constrained by vow not to touch; Social Security taxes

THE BALTIMORE SUN

WASHINGTON -- As they loudly accuse each other of fiscal recklessness, Al Gore and George W. Bush are frantically juggling their tax-and-spending proposals to hide a basic fact: Both presidential candidates may have already spent all the money likely to be available to them.

Stewardship of the nation's economy emerged last week as the latest issue in Campaign 2000, as Vice President Gore charged Texas Governor Bush with practicing "casino economics" while Bush said Gore would revive the era of "big government."

Rhetoric soared as both campaigns struggled to shoehorn their budgets into the surplus that is projected to be generated from federal tax sources other than Social Security taxes.

When all tax revenue is combined, federal budget projections foresee surpluses vast enough to accommodate virtually any spending proposal or tax cut, $3.2 trillion in all over the next 10 years.

But for political reasons, both Democrat Gore and Republican Bush have vowed not to touch any of the Social Security surplus, leaving behind a relatively paltry sum to work with-- about $893 billion for the decade -- if current federal spending is allowed to rise with inflation.

That self-imposed limit has proved to be surprisingly constricting to both camps, especially for Bush.

Even by his calculations, the Texas governor's mammoth tax cut proposal would cost the government $1.3 trillion over 10 years, far more money than congressional and White House budget forecasters predict will materialize in the non-Social Security surplus.

Add to that Bush's proposed increases in defense spending, health care, education and housing, and the governor appears to exceed the projected non-Social Security surplus by nearly $580 billion, according to Congressional Budget Office projections and Bush's own spending figures.

ka15 But Gore might have more at stake in the battle over budget numbers, since he has made economic stewardship the central theme of his White House bid. Though Gore's promised tax cut is a fraction of Bush's, his proposals for Medicare, education, health insurance coverage and Social Security are more generous.

ka0 All told, the vice president has outlined more than $1.1 trillion in new spending and debt reduction efforts, more than $200 billion above the most conservative congressional budget forecasts.

Each campaign accuses the other of spending far more money than either of these forecasts and insists its budgets is balanced.

"I feel completely comfortable that we will have plenty of money to make this work," said Elaine Kamarck, the Gore campaign's chief domestic policy adviser.

But to make his numbers work, Gore now says spending that was once supposed to come from the surplus will fit into expenditure forecasts already issued by the White House.

Many of Gore's campaign promises -- such as steady defense spending increases and an expansion of the earned income tax credit for the working poor -- were adopted by President Clinton in his 2001 budget and balanced by cuts elsewhere.

But, Gore advisers acknowledge, most of the vice president's $115 billion increase in education spending and $9 billion in cancer research would have to be offset by cuts they have yet to reveal.

"At some point, we might have to put out a more detailed budget," conceded a Gore budget adviser.

na Gore is also relying on $66 billion in new tobacco taxes and $50 billion from tax loophole closures, measures that President Clinton has long championed but Congress has ignored.

And Gore, despite his earlier pledge, would take $100 billion from the projected Social Security surplus to increase retirement benefits for elderly women even as he accuses Bush of dipping into the Social Security surplus.

"The person who has been making the charges against Governor Bush has been guilty of even worse profligate spending," said a Bush adviser.

Gore's assumptions appear to rely on more traditional accounting methods than Bush's.

Where Gore accepts surplus predictions laid out by the Congressional Budget Office and White House Office of Management and Budget, Bush has had to jettison those forecasts in favor of his own.

After successive days of promising new spending on everything from community health clinics to low-income homebuilding subsidies, Bush was tagged by skeptics this month as a "tax-cut-and-spend Republican," a play on the tax-and-spend liberal label that has dogged Democrats for two decades.

Even Bush campaign officials concede that the cost of the governor's tax cut has been somewhat understated.

Accumulating interest

The $1.3 trillion, 10-year cost estimate does not take into account the additional interest the government would have to pay on a federal debt that would be considerably larger than without the tax cut. Bush spokesman Ari Fleischer put that additional debt servicing cost at $60 billion over five years.

Since the Bush tax cut would grow substantially larger over 10 years, interest costs would swell to $300 billion, according to Charles L. Schultze, a senior economic fellow at the Brookings Institution. That would put the 10-year cost of the Bush tax plan at $1.6 trillion, not $1.3 trillion.

Schultze said that because of higher-than-expected economic growth, the true cost of the tax cut would be more like $1.7 trillion over 10 years, though no one can be certain just how large the surplus will be.

"The key thing here is that you're locking yourself into a $1.7 trillion tax cut when any kind of prudent or conservative forecaster will tell you the size of the [non-Social Security] surplus is uncertain," Schultze said.

"That's a ... big risk."

Pessimistic forecasts

Brandishing his own surplus forecasts, Bush maintains he still has not dipped into the Social Security surplus. Campaign officials say congressional and White House budget forecasts have been too pessimistic about economic growth and too generous with federal spending, thus significantly underestimating the size of the surplus.

For instance, the Congressional Budget Office, in its spending forecasts, assumes Congress will enact emergency spending measures each year that are comparable to last year's, though last year's emergency spending bill included one-time payments for the 2000 Census and any Y2K computer glitches that might have arisen.

Moreover, Fleischer said, congressional spending has been distorted in recent years by extra spending demanded by the president. Under Bush, that would not happen. And, he added, Bush plans to cut spending, though the campaign has yet to say where those cuts would fall.

"Our balanced budget is realistic, conservative and accurate," Fleischer said.

Robert D. Reischauer, a former Congressional Budget Office director who now heads the Urban Institute, cautioned that budgetary nitpicking might be unwarranted.

The Social Security surplus, he said, will for the next decade provide a buffer to keep the government from falling back into deficit spending. And besides, he said, these are just campaign promises, not legislative proposals.

"What presidents propose is never accepted hook, line and sinker," Reischauer said.

Whether any of these budget issues will matter in the fall election campaign is another question.

Economic stewardship

Bob Shrum, the vice president's media adviser, conceded that few voters will follow the precise details of the budget debate, but they will grasp Gore's larger theme: the economic stewardship of the Clinton-Gore administration has been far different -- and far more successful -- than the policies of George W. Bush's father, which are tied in voters' minds to the economic downturn of the early 1990s.

The idea is to tarnish the fresh new face of George W. Bush with the more familiar face of President Bush, whom voters tossed from office.

"People are very secure with the prosperity they have," Shrum said.

"It's important for them to make sure it's extended, that it's used in ways that make sense for them and for their children. And they're very insecure about the idea of going back.

"People do remember what it was like in 1991 and 1992."

But Fleischer said that attack will "fall on deaf ears," not so much because of the message but because of the messenger.

"The vice president has such a history of exaggeration and distortion, people are not inclined to buy it," he said.

Instead, Bush campaign officials hope, the voters will cast their ballots on the tone of the campaigns and the ideas put forth by the candidates, not the dry budgetary rubric those ideas must fall into.

Indeed, Bush adviser Reed said, every time Gore attacks Bush's budget, it gives the Bush campaign an opportunity to show off the governor as "a new and different kind of Republican," willing to cut taxes and spend money on human needs.

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