Investor’s Business Daily, October 26, 2000

BRAIN TRUST:

Presidential politics is at times reduced to a numbers’ game, as evidenced by Governor Bush’s and VP Gore’s bickering over tax cut and new spending numbers in their debates. Each candidate speaks with exactness about the parameters of their proposals and certainty about their ability to implement them. But budget numbers, anything outside of two weeks, are notoriously uncertain. And what neither candidate will recognize is that all the money they’re throwing around-that estimated $4.6 trillion in budget surplus over the next decade—may be spent before it ever makes it to Washington.

A raft of studies circulating in Washington’s policy wonk circles points this out. On October 6, the Congressional Budget Office(CBO) warned that budget surpluses are likely to be short lived. If left unreformed, current entitlement programs will unbalance the federal budget deficit in 2027 even if every penny of the current Social Security and Medicare surpluses bought back government bonds rather than supported new spending programs.

That may be a distance worry, but DC think tanks focused closer to the present also conclude that the US government doesn’t enjoy the level of disposable income that the two candidates would have us believe. While candidates Bush and Gore speak in terms of $4.6 trillion surpluses, analysts from the Brookings Institution, the Center on Budget and Policy Priorities(CBPP), and the Concord Coalition put the actual usable surplus in the area of $600 billion to $1.2 trillion. That’s real money, but it won’t support the myriad of programs the candidates promise to bestow on important constituencies.

Many factors conspire to shrink the usable surplus. Congress, the members of which Mark Twain noted constituted America’s only criminal class, will consume a share before either candidate places a hand on the Bible to take the oath of office. Estimated budget surpluses are based on its doing in the current and future years what it promised to do in the past. This isn’t likely. As Rep. Ron Paul (R-Texas) said in handicapping the 106th Congress, “Conservatives will get their type of spending, and liberals will get theirs.”

In recent years they outspent caps by declaring such predictable expenses as the census emergencies. This is an election year so the pressure to spend in tough congressional districts is increased. As a Washington Post story recently noted, the Republican leadership is busy giving embattled congressmen bundles of pork to take home and pass out on the campaign trail.

Further factors work to skew budget forecasts towards optimism. If the law says a programs sunsets, the CBO doesn’t include the money needed to keep it going. It’s not their fault, but it understates the chunk of money needed to keep our government living in the manner to which it’s become accustomed, since the only thing that sunsets in DC is, well, the sun. Tax rates go up and down; tax provisions constantly fluctuate; but spending programs, like the Energizer Bunny, keep going and going and going.

Write the CBPP’s James Horney and Robert Greenstein, “Assuming that current policy truly is continued—that payments to farmers that have provided for the last three years will be continued in future years, that current tax credits will be extended instead of being allowed to expire, that the Alternative Minimum Tax will not be allowed to take a bigger and bigger bite out of the pocket of middle-income taxpayers, and that inflation-adjusted discretionary spending will increase at the rate the U.S. population—reduces the available surpluses by about $600 billion, to $1.2 trillion over 10 years.” With other adjustments, they peg the usable surplus at $700 billion, which comes to roughly $7,000 per household over the next decade.

This has important policy implications, as we evaluate the proposed programs of the would-be presidents, viewing expensive promises with some skepticism and trepidation. Gore, for instance, has so far promised $1.4 trillion in new spending, according to the Committee for a Responsible Budget, while pledging that paying down the debt and signing balanced budgets to be among his top priorities. And Bush isn’t cheap on the stump, having promised $476 billion in new spending to accompany his $1.3 trillion in tax cuts.

So far, however, press scrutiny has been unbalanced, and exactly wrong, focusing on Bush’s “expensive” across the board tax cut while glossing over the costs of the programs both candidates promise. Yet, policy history teaches that tax rates can be adjusted up or down but spending programs just keep on growing, as beneficiaries organize to work the system. And even Gore’s tax cuts are more dangerous than Bush’s, since they are mostly new social programs masquerading as tax cuts rather than straightforward cut in tax rates.

If Bush wasn’t promising so much new spending himself, he might be in a position to point this out.

Sally Pipes is the President and CEO of the Pacific Research Institute, a California-based think tank. She can be reached via email at spipes@pacificresearch.org.