A look at the details is, in a word, terrifying. Clinton, despite his neoconservative rhetoric, appears from his policy blueprints to be a programmatic liberal. He proposes at least two dozen new tax and spending programs, including national health insurance, welfare reform, national education reform and universal job training. The Clinton campaign hasn’t estimated the cost of its national health plan and says the other three programs should total about $20 billion a year. But the real price is almost certainly higher–perhaps as much as $150 billion, including health-care reform.
Bush, on the other hand, has suddenly proclaimed himself a born-again supplysider. He wants to cut spending, cut taxes and let the private sector take care of the nation’s economic problems. He declines to provide the details of his proposed spending cuts, but they would surely be heroic: his proposal for a reduction of roughly 10 percent in all federal spending, excluding social security, would mean politically explosive cutbacks in sacred cows like Medicare, Medicaid and college-loan guarantees. In return, some unspecified portion of the projected savings would be plowed back into the economy in the form of investment incentives, capital-gains reductions and, yes, tax cuts for the middle class.
Clinton, in short, promises to spend his way back to economic health while Bush wants to put government on a crash diet to unleash the magic of the market. What is terrifying about these two approaches to economic policy is that both candidates are so plainly guilty of overpromising. Bush, for example, would be lucky to win even half his proposed reductions in federal spending from a Republican Congress-and he would have to settle for much smaller retrenchments if, as now seems likely, the Democrats keep control of the House and Senate. As a result, his plan to stimulate the economy with tax cuts balanced by spending reductions is largely based on political fantasy.
The Clinton program, on the other hand, is economic fantasy. By failing to put a price tag on his four biggest programs, as well as some of the smaller ones, Clinton is able to pretend that he would add only $42 billion to federal spending during his first year in office and only $64 billion by 1996. The real cost is arguably at least three times higher than that. Where will the money come from? Clinton says he would raise federal tax revenues by $30 billion through a combination of improved tax collections and new taxes on corporations and the rich. (“Rich” is defined as any family with an annual income over $200,000.) He also says he can cut the cost of civilian government by $26 billion. Most of the rest, presumably, is deficit spending.
Such phony bookkeeping enables both candidates to ignore what is arguably the biggest economic-policy issue of the 1990s: the federal deficit. After 12 years of borrowing and spending, the publicly held national debt has surpassed $3 trillion. The interest on that debt, now $200 billion a year, is the fastest-growing item in the federal budget. The annual deficit, about $320 billion for 1992, squats over the economy like Jabba the Hutt, keeping interest rates artificially high, devouring savings and crowding out private investment.
The deficit has already crippled George Bush’s presidency. It stifled any thought he may have had for new federal initiatives, and it prevented him from proposing conventional pump-priming measures, such as tax cuts or public-works spending, to stimulate the economy during the 1990-91 recession or in the current recovery. Whoever walks into the White House next January is going to discover a deficit problem is four years and many billions of dollars worse than the one Bush inherited in 1989.
Both candidates are ducking this brutal reality. Bush pretends he can gradually control the deficit by chopping federal spending twice as much as he lowers taxes. He asks for two gimmicks as insurance: the line-item veto and the balanced-budget amendment. Clinton wants the line-item veto as well, though he rejects a balanced-budget amendment. But he assumes his spending programs will accelerate economic growth and boost tax revenues, thus bringing the deficit toward an eventual cure. He says his plan “will cut the deficit in half within four years, and assure that the deficit continues to fall each year after that.” He doesn’t explain how this miracle will occur-and even if his spending programs are good investments over the long term, he seems not to recognize that their cost will only worsen the deficit, and dampen economic growth, in the near term.
In fairness to the candidates, many Americans seem to prefer being lied to. Deficit reduction is a dreary game of parceling out austerity and, in effect, picking losers. The two candidates who offered straight talk about the deficit in this election year, Paul Tsongas and Ross Perot, both bombed out. Tsongas won four Democratic primaries before fading. Perot took one look at the budget plan his advisers had drawn up and folded his hand. So assuming Bush and Clinton are playing it safe by avoiding the deficit, what else is in their programs that might improve productivity and ensure growth?
Both men have plans to provide health insurance for the millions of Americans who now do not have medical insurance. Clinton’s program is bigger and covers everyone. (Bush’s doesn’t.) However sound this may be, pouring more money into health care does nothing to boost productivity or accelerate growth. As for the rest of their ideas, Bush’s job-training program should improve the quality of the work force, and Clinton’s much bigger education and training reforms might do even more long-term good-if he can find a way to pay for them. Clinton would also spend $20 billion a year to launch a high-tech public-works program to improve the nation’s roads, railroads and telecommunications. And his version of welfare reform ultimately includes a guarantee that government would be the employer of last resort. All this may be good social policy -but many economists, along with virtually all conservatives, think these programs would only increase the burden of deficit spending on the private-sector economy.
Past presidents had the luxury of assuming the U.S. economy was strong enough to shrug off the deficit’s net drag. That’s what Ronald Reagan meant when he quipped, “The deficit? It’s big enough to take care of itself.” Those days are gone. Whoever takes office next January must understand that if he doesn’t take care of the deficit, it will surely take care of him.
