Bush, Kerry Seen Dodging Tough Action on Budget

Author: Tim Ahmann

Published: July 2, 2004

WASHINGTON, July 2 (Reuters) - President George W. Bush and Democratic rival John Kerry both talk tough on the need to regain control over a soaring U.S. budget, but experts say the fiscal plans both men have put forward belie their rhetoric.

In some sense, Bush took his lumps early.

When he unveiled his fiscal 2005 budget blueprint in February, Bush said he could slash the bloated U.S. budget gap in half in five years while making pricey tax cuts permanent.

Analysts, however, were quick to say the claim lacked credibility.

They said the White House had left out needed money for military operations in Iraq and Afghanistan and put off a costly fix for the alternative minimum tax, a system originally aimed at ensuring the wealthy paid at least some taxes but expected to affect growing numbers of middle-class Americans in coming years.

The Kerry campaign tried to take the high road. Advisers vowed to present a detailed economic plan to clearly show how the Massachusetts senator would halve the deficit by 2009.

But, so far, they have offered only a "framework."

While Kerry aides say that provides enough of a prism to evaluate the senator's plans, budget analysts disagree.

"I think there are a lot of promises being made that are specific and pledges of restraint that are nonspecific," said Robert Bixby, head of the bipartisan Concord Coalition. "That's always a signal that you don't really have a plan."

The budget shortfall hit a record $374 billion last year due to a weak economy, higher spending for defense and domestic security and tax cuts won by Bush totaling $1.7 trillion over 10 years. It is expected to top $400 billion this year.

Bush has said he can whittle it back by holding the line on a wide array of government spending, while boosting outlays for defense and security and extending the tax cuts.

"The arithmetic holds up but he has not yet made the proposals to make that possible," said William Niskanen, chairman of the libertarian Cato Institute. "I think the Bush budget is a fraud."

'BORROW AND SPEND REPUBLICAN'

Niskanen is ideologically aligned with Bush's tax-cutting agenda, but chafes at a lack of spending restraint. "Bush is best described as a borrow-and-spend Republican," he said.

For his part, Kerry would extend tax cuts Bush set up for the middle class but roll back those benefiting Americans earning over $200,000 a year, using the savings to fund a $72-billion-a-year package of health care reforms.

"That just keeps us from digging a bigger hole, it doesn't really get us out of the hole we're already in," said Isabel Sawhill, director of economic studies at the Brookings Institution.

"I don't think either presidential candidate has a real plan right now for reducing the deficit," laments Sawhill, a budget official under former President Bill Clinton. "It's a draw on paper between them, or close to a draw."

Leonard Burman, a tax expert at the Urban Institute echoes Sawhill's appraisal.

"The two plans in terms of their overall impact on the budget are not that different," he told a recent forum sponsored by the Brookings Institution. "Including health spending, they both would add about $1.2 trillion dollars to the deficit over the next 10 years."

Kerry aide Jason Furman disputes that contention, noting the Democrat's commitment to so-called pay-as-you-go budget rules that would require all proposals to be paid for.

Some Democratic deficit hawks are comforted that Kerry has surrounded himself with like-minded advisers, including Clinton era veterans Roger Altman and Gene Sperling -- the top two economic advisers to the campaign.

Many economists say mounting debts will ultimately push market interest rates higher as the government is forced to compete with the private sector in a scramble for funds.

"I think we've gotten into a fiscal situation that is going to demand some action sometime fairly soon," said Bruce Bartlett, a tax expert with close ties to the Bush White House.

URL: http://www.reuters.com/financeNewsArticle.jhtml?type=bondsNews&storyID=5578650