Obscured by politics: Bush, Kerry offer few details on economic plans

Author: Chris Otts

Published: October 22, 2004

At campaign stops and during the recent debates, President

Bush and Democratic nominee John Kerry have accused each other of supporting reckless economic policies that will exacerbate the budget deficit.

They both may be right.

Kerry has noted that since Bush took office the federal budget has plummeted from a record surplus to a record deficit, spurred in part by Bush's broad tax cuts. The government incurred $413 billion in debt for fiscal year 2004, the Treasury Department announced last week.

But "it's just not credible," for Kerry to pledge to cut the deficit, having voted to break spending caps more than 200 times in the Senate, Bush charged in the Oct. 8 debate. Kerry will raise taxes and spend money if elected, Bush said.

Both men have proposed a $1 trillion increase in new spending or tax cuts. Bush pledges he can cut the deficit in half in five years; Kerry promises to do the same in four.

So which one is the fiscal conservative?

In the midst of an election season, it's a tough call, economic policy experts said. Each candidate has avoided outlining exactly how his plan would work in fear of a political backlash.

"It's more the time for generalities than specific details," said Eric Engen, a former senior economist at the Federal Reserve Board, now a scholar at the American Enterprise Institute.

Nonetheless, economists warn of a brewing storm when it comes to the deficit and the ability of entitlement programs like Social Security and Medicare to pay out benefits in coming decades.

In testimony before Congress in February and speeches since, Federal Reserve Chairman Alan Greenspan said that, unless reforms are enacted soon, Social Security and Medicare will not be able to afford the payouts they've promised. Baby boomers will start collecting Social Security in 2008, Greenspan said.

"This next president is going to have a different issue on his mind than 10 or 20 years ago. This problem is going to start hitting on their watch," said Peter G. Peterson, who served as commerce secretary to President Richard Nixon.

Politicians have not been candid with Americans about the ailing programs and ballooning deficit, said Peterson, whose new book, "Running on Empty," warns the economy could fall into another depression without long-term reforms.

In their debates, Kerry and Bush offered few realistic solutions to the problem, experts said.

Kerry said he wants to roll back Bush's tax cuts for people earning more than $200,000 a year, though economists say that revenue won't come close to covering the new spending he's proposed. In an August study, Engen estimated Kerry's proposals would cost $1.7 trillion over 10 years.

A major part of Bush's solution is to make the tax cuts permanent, which would cost almost $1 trillion over 10 years, according to the bipartisan Congressional Budget Office.

"We've got a budget problem, and they're both proposing to add $1 [trillion] to $2 trillion to the deficit," said Leonard Burman, co-director of the Urban-Brookings Tax Policy Center, who served as a Treasury Department official in the Clinton administration.

Peterson said Kerry and Bush prefer to offer Americans "a free lunch" in the midst of an election season. They would do better to level with the people, admitting that some sacrifices are necessary, especially during the war in Iraq, to get the deficit under control.

"Here we are fighting a war with massive expenditures. I am old enough to remember the second World War when we were asked to sacrifice," Peterson said. "Now what sacrifice are we asking the American people to make? We're asking them to accept a tax cut."

Peterson said to avoid the possibility of "a real aneurysm" during the next term, Kerry or Bush will have to win bipartisan support in Congress to push reforms through.

Sen. Jon Corzine, D-N.J., who's leading the Democrats' efforts to win a majority in the Senate Nov. 2, said repealing the tax cut for the wealthiest Americans is the first step to reigning in the deficit. If the Democrats don't gain any Senate seats, he said he fears the Republican majority will make the tax cuts permanent and Bush will try to privatize Social Security.

"It's totally irresponsible, the situation we're in," Corzine said.

Sen. George Allen, R-Va., who's leading the Republicans' efforts to keep the Senate majority, said in the next term, "We're in a war and our priorities will remain as they should, national defense and homeland security."

Other areas of the budget will have to fight over the remaining resources, he said.

Burman criticized the Republican-led Congress for adopting the tax cuts while allowing non-defense spending to increase. Tax cuts usually mean less domestic spending, he said.

Burman said the record budget surplus that Bush inherited at the end of the Clinton administration was not due to extraordinary leadership but to "gridlock."

Democrats wanted to increase spending while Republicans wanted to cut taxes. Neither side would support the other's proposals, he said.

Peterson said the next president can fix the problem simply by honestly addressing it. "I don't want to underestimate the possibility that with real presidential leadership and esteemed national figures telling the truth, that there's a pretty good shot the American people would respond," he said.

Burman was not so optimistic: "Personally, I'm rooting for gridlock."