I will not say I told you so :p


Kerry's deficit plan collides with campaign promises

By Jonathan Weisman
The Washington Post

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WASHINGTON — John Kerry's pledge to reduce record federal budget deficits is colliding with an obstacle that may be growing by the week: his campaign commitments.
A Washington Post review of Kerry's tax cuts and spending plans, in addition to interviews with campaign staff members and analyses by conservative and liberal experts, suggests that they could worsen the federal budget deficit by nearly as much as President Bush's agenda. If projected savings from unspecified cuts do not materialize, Kerry's pledges could outstrip those of the president, whom the Democrat repeatedly has accused of unprecedented fiscal recklessness.

"I wish Senator Kerry was providing a starker contrast," lamented Leonard Burman, a tax-policy analyst at the nonpartisan Urban Institute and former Treasury Department official in the Clinton administration. "The (Bush) policies with respect to the deficit are insane. They have to be reversed. But it will take presidential leadership to do it."

"You have to begin with the premise that the steps you need to take to reduce deficits are almost diametrically opposed to the steps you need to take to win elections," said Leon Panetta, President Clinton's first budget director. "You can cut spending and raise taxes, or you can cut taxes and raise spending."

Bush and Kerry have chosen to do the latter, and would leave in place all or some of the tax reductions enacted early in the Bush administration.

Those tax cuts are scheduled to expire by 2011. Bush wants to make them permanent, a step that the Treasury says would cost about $990 billion over 10 years. Kerry says he would extend tax cuts that benefit the poor and middle class. But he would allow rates to rise for the wealthy, generating about $565 billion in extra revenue.

That money, however, would be consumed quickly by a health-insurance proposal that Kerry says will cost an estimated $653 billion, as well as a $200 billion education initiative.

Other campaign promises include aid to state governments; increased funding for veterans' health care, homeland security, energy research and conservation; and job-creation tax credits. They would add $358 billion to $658 billion to the bottom line, according to a review of Kerry campaign material and a recent study by economists Eric Engen and Kevin Hassett at the conservative American Enterprise Institute.

Kerry says he would offset the cost of those programs by cutting federal contracting, some agriculture subsidies and "out-of-control administrative costs" in the government. Other savings would come from a revamping of the student-loan program, a commission to cut "corporate welfare" and the elimination of some missile-defense and other military-weapons programs.

Assuming all those savings materialize, the tax-cut and spending proposals still could add as much as $1.3 trillion to the deficit over a decade.

That total is close to the bottom line of Bush's plan, which could add about $1.35 trillion to the deficit. Along with the $990 billion tax-cut extension, Bush has proposed health-care tax credits worth $120 billion, energy tax credits worth $175 billion and other tax proposals.




Those parallel numbers have become an embarrassment to Democratic economists, who have tried — but failed — to convince the Kerry campaign that its rhetoric on fiscal rectitude should be matched by substance.

"The deficit issue has just not been salient enough for Kerry to justify the pain required to address it in a political campaign," said one Democratic economist who spoke on the condition of anonymity.

Some Democrats say they can defend Kerry's promises only by comparing them with Bush's first term, during which record surpluses turned to record deficits.

"We're faced with a choice between a president who has heavily mortgaged the country and who has no plan to deal with deficits except economic growth, versus an opponent who says he wants to do something about the deficit but whose numbers may not add up," Panetta said.

Bush campaign spokesman Terry Holt said Kerry's promises are far more profligate than the president's. By the Bush campaign's tabulations, Kerry would add $1.3 trillion to the national debt above where it would be under Bush's budget for the next 10 years.

Holt disputed the idea that a Kerry administration would find savings in a "corporate welfare commission" or dramatic cuts to government overhead, calling them "a bunch of budget gimmicks that don't add up."

Kerry campaign aides say such tabulations are unfair. Kerry has vowed that he would follow strict rules mandating that any new tax cut or spending plan be offset by revenue increases or equivalent spending cuts, said Gene Sperling, a Kerry economic adviser.

If savings cannot be found, programs will have to be jettisoned, Sperling said. "This is the first time I've ever seen a candidate say, 'Even my top priorities will be constrained by fiscal discipline.' "

In contrast, Bush has doggedly stuck to his massive tax cuts and costly energy plan, despite changing budget outlooks, Sperling said. Besides, if such tabulations are to include every campaign promise, Bush should be tagged with a Social Security reform plan that would cost at least $1 trillion over the first decade, said Jason Furman, Kerry's economic-policy director.

The president also has proposed a dramatic, tax-free savings account with annual deposit limits so large that they effectively would end taxation of capital gains, dividends and interest for all but the richest Americans. At $5.6 billion, the cost over the first decade would be small. During ensuing decades, though, the cost could be as high as $50 billion a year, according to an analysis by the Tax Policy Center, run by the Urban Institute and the center-left Brookings Institution.

Panetta offered another defense of Kerry: Do not believe all that he says. In 1992, Clinton pledged to tackle the deficit with some questionable proposals, Panetta said. Once in office, he stuck to that pledge far more strictly than the myriad campaign promises he laid out, pushing through a politically painful package of tax increases and spending cuts that helped bring the government into the black for four consecutive years.

"I didn't believe Clinton's numbers, either, when he was running," Panetta acknowledged. "But what was passed was not what he campaigned on."


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