Nov. 15 (Bloomberg) -- Hillary Clinton and her rivals for the Democratic presidential nomination are promising new domestic programs, tax cuts for the middle class and a return to balanced budgets. One problem: Their numbers don't add up.

The top candidates, Clinton, Senator Barack Obama of Illinois and former Senator John Edwards of North Carolina, all propose more than $150 billion a year in tax breaks for middle- income earners and new federal spending on health care, energy and education. They also pledge ``fiscal responsibility,'' a phrase Clinton used seven times during an Oct. 30 debate.

While vowing to rein in the alternative minimum tax, they won't say how they would fix the levy, which is set to raise $400 billion over five years, increasingly ensnaring the middle class. They also rely too much on rolling back tax cuts for the wealthy and overestimate savings from closing loopholes and improving health-care technology, budget experts say.

``The Democrats at least are talking about paying for their proposals, but they're often using sources of revenue that probably are insufficient to cover what they want to do, or using them more than once,'' said Isabel Sawhill, associate director of former President Bill Clinton's budget office.

Leon Panetta, who served as Bill Clinton's budget director, said if Democrats don't ``face up to the tough decisions and use real numbers,'' it will ``come back to haunt them.''

U.S. Economy

With the U.S. economy historically serving as an engine for the world, it's not just Americans who would like to see a return to the fiscal policies of the Clinton presidency. The economy grew an average 3.7 percent annually during that time, as the dollar rose, deficits disappeared and job rolls increased by almost a quarter of a million a month.

Campaign promises can end up being nothing more than rhetoric, and many of the candidates don't have full-fledged proposals, making comparisons difficult. Yet the pledges can be critical: President George W. Bush and former President Ronald Reagan both fulfilled campaign commitments to cut taxes.

The budget promises of the Democratic presidential candidates would likely turn what the Congressional Budget Office sees as a surplus of $62 billion in 2012 into a deficit of about $200 billion. That would exceed the $163 billion shortfall in the 2007 fiscal year, which ended on Sept. 30.

If the U.S. withdraws most troops from Iraq and Afghanistan, that 2012 deficit would be reduced by more than $100 billion, based on CBO calculations.

Expiring Tax Cuts?

The shift from projected surplus to deficit occurs because the CBO assumes that all the Bush tax cuts expire at the end of 2010, as mandated by current law. While the Democrats say they'll allow the tax cuts for the wealthy to end, they want to extend the lower rates for the middle class. That would cost the government about $125 billion.

Then there's a potential hit of roughly $40 billion to the budget from the candidates' promise to scale back the AMT, a tax intended for the wealthy that's now affecting middle-income earners because it was never indexed for inflation. None of the campaigns have issued a proposal for fixing the AMT and all refused to say how they would pay for it.

On the spending side, the Democrats plan to shell out $100 billion or more a year, with the big-ticket item being an expansion of health-care coverage. Other spending proposals include around $15 billion to reduce U.S. dependence on imported oil and billions more to increase government support for research and development.

Exaggerated Claims

Experts say the campaigns also suffer from exaggerated claims of savings from making health care more efficient and reaping more revenue from closing tax loopholes, potentially adding billions more to a 2012 deficit. Clinton, 60, says her plan to modernize health systems would save $35 billion a year.

CBO Director Peter Orszag said a health-modernization plan of that kind would probably not achieve that much savings. ``That would likely be substantially above anything you would see in a CBO score,'' he told reporters on Nov. 13, while not speaking specifically about Clinton's approach.

Clinton, the front-runner in national polls, has gone further than her rivals in itemizing spending and ways she plans to avoid wider deficits, offering cost details on at least nine major proposals. ``I am not proposing anything I don't have a way to pay for,'' she said during an Oct. 9 campaign event in Iowa.

Like Obama, 46, and Edwards, 54, Clinton plans to pay for her $110 billion health-care program in part by rolling back Bush's tax cuts for the wealthiest Americans, which she estimates would save $52 billion.

Pay-Go

``All the Democrats say they are supporters of pay-go,'' or rules that require offsets for new spending, said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. ``If you support pay-go, you can't say that you are going to repeal the tax cuts after 2010 and use that savings for something else, because there are no tax cuts to repeal. This is a case of wanting to have it both ways. None of that is real money.''

Clinton campaign aides say they took a conservative approach to estimating savings from health-care programs and are comfortable with their figures; they also point out that the Bush tax cuts are part of the White House budget estimates and argue that makes them fair game for offsets.

``Senator Clinton has made it a priority to say how she would pay for every new initiative she has announced without increasing the deficit,'' said spokesman Phil Singer.

Middle-Class Taxes

Clinton has proposed more than $60 billion a year in additional spending on proposals for energy, education, infrastructure improvements, tax credits for retirement savings, help for college students, family leave programs and the National Institutes of Health.

Obama and Edwards both have plans to cut middle-class taxes that go beyond fixing the AMT. Edwards says his proposal will cost about $25 billion in revenue, made up for by raising the capital gains rate to 28 percent, from 15 percent now, for families making more than $250,000 a year. Obama says he will pay for his $85 billion initiative by raising the capital gains rate, assessing more investment income, closing corporate tax loopholes and increasing penalties for tax evasion.

Obama's proposal to close the ``tax gap'' has its skeptics. ``The `closing-the-tax-gap' mantra has been going around Washington for the past three to five years,'' said Peter Sepp, vice president for communications at the National Taxpayers Union. ``No one really knows how much the tax gap is.''

Tax Cuts

Obama's campaign estimates his health-care proposal will cost less than the Clinton and Edwards plans, probably closer to $65 billion a year. Obama, however, proposes more extensive tax cuts than the other two leading candidates. His proposal to reduce dependence on foreign oil and develop alternative energy carries an estimated cost of $150 billion over 10 years, funded entirely by selling emissions allowances, his campaign says.

There is some candor in this year's Democratic field. While Edwards aims to reduce the deficit, he says some policies take a higher priority. Senator Christopher Dodd of Connecticut favors a controversial carbon tax that would raise lots of revenue.

Other candidates offer numerous proposals yet mostly avoid politically unpopular steps to pay for them. New Mexico Governor Bill Richardson, 60, has proposed a slew of new tax breaks, for everyone from investors who put money into high-technology start-ups to companies that hire better-paid workers.

Unlike the other Democrats, Richardson says he would pay for his initiatives in part by pulling U.S. troops out of Iraq. He also pledges to slash what he calls pork-barrel spending and corporate welfare.

Social Security Crunch

One looming issue for all the candidates is Social Security, which the U.S. government estimates will go bankrupt by 2041.

Clinton has vowed to restore ``fiscal responsibility'' to the system to shore it up. Still, she has rejected raising the retirement age or cutting benefits and has been negative about the possibility of raising payroll taxes.

``Campaigns are the danger zone for long-term fiscal policy,'' said Robert Bixby, executive director of the Arlington, Virginia-based Concord Coalition, which advocates for balanced budgets. ``It's very easy to make big promises and balance them with vague offsets.''

To contact the reporters on this story: Kristin Jensen in Washington at kjensen@bloomberg.net; Rich Miller in Washington at rmiller28@bloomberg.net

Last Updated: November 15, 2007 10:45 EST