It took three tries over the past nine months. But with his grandiosely titled Agenda for American Renewal, President Bush has come up with an economic blueprint he describes as comprehensive and forward-looking. However, when you look between the blue covers ofhis latest economic plan,the President is playingthe fiscal equivalent ofthe old shell game. Except this time, there isn't even a pea.
Unveiled in Detroit on Sept. 10, the proposal claims to cut $132 billion from "mandatory" spending over the next five years. The savings, Bush says, could bankroll a one-percentage-point reduction in personal income tax rates, a cut from 15% to 10% in the lowest corporate tax rate, a capital-gains tax cut, and more generous write-offs for capital investment by small businesses. In other venues, Bush also has been calling for an increase in the personal exemption.
BUDGET-BABBLE. The Bush plan, whatever its virtues as a campaign document, has two small problems. The first is that the President has never offered anything close to $132 billion in mandatory spending cuts. The second is that he promises to use the same money at least three times--to cut the deficit, to finance a tax cut, and to pay for all the election-year goodies he's passing around.
Bush isn't alone in dodging tough budget questions. Presidential rival Bill Clinton does little more than nod to the issue himself, and he has to rely on some dubious tax hikes to make his plan add up. But at least the Arkansas Governor avoids some of the White House's most egregious gimmicks.
Those are worth a look, after first hacking through some budget-babble. Mandatory programs are those where the government automatically pays everyone eligible for them. Among the biggest mandatory programs are interest on the debt, Social Security, and the bank and thrift bailouts. The President has said that Social Security and veterans' benefits are off the table, and he's hardly going to renege on interest payments or refuse to pay off bank and thrift depositors. Those items account for about 60% of the $5 trillion the government expects to shell out on mandatory programs over the next five years.
That leaves medicare and medicaid, which eat up about half of the remaining spending. Student loans, agricultural subsidies, payments to retired federal employees, and some poverty programs such as welfare and food stamps make up the rest. To keep his promise, Bush would have to slice $132 billion out of these $2 trillion in planned expenditures.
He has never really said how he might do it. Bush has talked about capping entitlements--that is, limiting total federal spending for all those programs to a fixed amount every year. But a cap means nothing without real cuts in specific programs. In the President's July 24 budget review--his last official word on the subject--Bush included a list of "examples" of how to cut medicare, medicaid, and the rest. But Budget Director Richard G. Darman hasn't endorsed any of the proposals, insisting that they were merely illustrative. In his fiscal 1993 budget, the President did offer about $30 billion in program cuts. But about 10% of that was in veterans' programs--proposals Bush now says are safe from the budget ax.
And how about the way Bush wants to "spend" the savings? The President's July 24 budget update promised a surplus by 1998. But it could only get there by--guess what--reducing planned mandatory spending by more than $200 billion. If the cuts aren't made, or if they are used to bankroll a big tax cut, the 1998 deficit would still exceed $100 billion, the Office of Management & Budget estimates. The Congressional Budget Office says things will be far worse, predicting a deficit topping $250 billion.
DOUBLE-TALK. Those estimates, of course, were made before Bush started offering billions in election-year largess and before terrible hurricanes tore through Florida and Hawaii. The House Budget Committee estimates that the President already has promised an additional $12 billion in new spending. An expanded school-voucher bill Bush has been pushing could cost $30 billion more. And the campaign still has six weeks to go.
One other point about the taxes: Even if Bush were serious about spending reductions, the $132 billion wouldn't cover the cost of his promised tax cuts, at least according to congressional estimates. The individual tax cut alone would cost at least $142 billion over five years, and that's before the President cuts the lowest corporate tax rate, allows more generous first-year write-offs for small-business capital investment, and slashes the capital-gains tax. Add it up, and even cutting $132 billion from mandatory spending would probably leave him $30 billion short.
Bush hasn't cornered the market on deficit double-talk, of course. But accusing Clinton of fiscal fuzziness won't get the President off the hook, especially since he says the election is about trust. A forthright economic plan, though late, might have restored some of the public's tattered confidence in Bush's economic stewardship. But Agenda for American Renewal's budgetary sleight of hand is no substitute for a serious attempt to put the nation's economic house in order.