Major Fiscal Worries Not on Anyone’s Agenda

Sen. John F. Kerry has given scores of policy speeches in his bid for the presidency, issued reams of position papers, and guided the 37-page platform on major issues that the Democratic National Convention will adopt today.

But Kerry and the platform are vague or silent on some of the far-reaching issues that will confront the next president: how to address the burgeoning budget deficit and the financial instability of Social Security and Medicare.

Kerry has said he wants to halve the deficit in four years, but independent experts have questioned whether that promise squares with costly domestic initiatives he has proposed. And he has offered few details on how he would handle the bigger problems that loom after 2008, when large numbers of baby boomers begin to draw government retirement benefits.

In that, Kerry is not unlike President Bush, who has been equivocal on how he would solve these problems that could hem in other programs for years.

Bush has also promised to halve the deficit in four years, but has overseen huge increases in spending. He has called for a Social Security overhaul, but has not specified how the changes would ensure the program’s long-term solvency.

The upshot: Bush and Kerry are portraying this election as a momentous turning point in the nation’s direction -- but without spelling out their differences on some of the toughest choices the next administration will face.

“It should not be surprising that no one wants to talk about these [issues] in the middle of an election year, but that is what is going to be badly needed once this election is over,” said Isabel V. Sawhill, a former Clinton administration official who directs economics studies at the Brookings Institution think tank in Washington. “ ... Neither [candidate] has a plan for what to do after four years, when the problem gets much, much worse.”

The coming challenges are as daunting as they are inescapable. Medicare is due to run out of money in 2019. Social Security’s trust fund will be insolvent in 2052, but it is projected that as soon as 2019, the program will pay out more than it collects.

All of that darkens an already grim budget outlook. Even if Bush succeeded in halving by 2008 the shortfall -- estimated for this year at $477 billion -- it would leave deficits of more than $200 billion annually through 2014, according to the Congressional Budget Office. And deficits would likely rise near the end of the decade, the CBO projects.

Nonetheless, neither candidate has made balancing the budget a focus like former Sen. Paul E. Tsongas (D-Mass.) and independent candidate H. Ross Perot did in their 1992 presidential campaigns. Neither Tsongas nor Perot made it to the White House, but they pressured others to address the deficit issue.

“It’s good that [Kerry and Bush] have acknowledged that deficit reduction is an important priority, but what’s bad is it’s not as high a priority as their tax and spending initiatives,” said Maya MacGuineas, executive director of the Committee for a Responsible Federal Budget.

That points to the limits of Kerry’s effort to target Bush’s fiscal policies. He blames Bush for wrecking the budget by letting the $5.6-trillion surplus the president inherited in 2001 turn into a deficit of $2.75 trillion over the next 10 years. “George Bush now promises to reduce the deficit -- the same promise of fiscal responsibility he has made and broken in every year,” Kerry has said.

Kerry calls for reinstating budget requirements, which Congress recently let lapse, that set spending caps and established a “pay-as-you-go” rule to limit deficit increases. That rule would make it harder to enact a tax cut or spending increase unless it was offset by tax hikes or spending cuts in other areas.

Kerry argues that he would adhere to that principle because, he says, the cost of his two biggest domestic initiatives would be offset by raising taxes on upper-income families.

By Kerry’s accounting, his plan to expand health coverage would cost about $653 billion over 10 years, and his education initiatives about $200 billion over 10 years. His plan to repeal tax breaks for families earning more than $200,000 a year would raise about $860 billion in that period.

Some of Kerry’s smaller initiatives have also been linked to cost-saving proposals. He coupled his $13-billion national service program with a proposal to cut interest subsidies for banks that make student loans. Kerry plans to offset the cost of a $30-billion energy plan by increasing fees charged under the Superfund toxic cleanup program.

But he has also offered proposals without specific offsets, such as a plan to give $50 billion in aid to states and a call for mandatory healthcare for veterans, which could cost $20 billion to $300 billion over 10 years.

Jason Furman, economic policy chief for Kerry’s campaign, points to additional cost-saving proposals the Massachusetts senator has pushed: cutting the government’s electricity use, travel and use of consultants; a line-item veto to let the president excise “pork barrel” projects from spending bills; and a commission to identify wasteful “corporate welfare.”

Republicans challenge Kerry’s claim to fiscal restraint, saying he has not found enough realistic proposals to pay for his ambitious plans. They say the cost estimates for his health plan are unrealistically low. They also note that his commitment to the pay-as-you-go concept does not apply to his support for making permanent Bush’s tax cuts for families earning less than $200,000 -- which would cost about $500 billion over 10 years.

Furman said that what mattered was not whether Kerry’s promises added up to the penny, but that he was committed to making them add up. And he argued that trying to offset new initiatives was the first step to more aggressive deficit reduction efforts. “The first thing we can do when you’re in a hole is stop digging,” Furman said.

But Kerry has not laid out a clear path to solvency for Social Security and Medicare. Experts agree that the longer the government takes to fix those programs, the harder it will be.

Kerry and the Democratic platform pledge fealty to the programs. But the candidate and the platform say more about what they will not do than what they will to avert insolvency.

Kerry opposes privatizing the programs, cutting benefits or raising taxes to shore them up. His campaign website details a plan to “protect and strengthen” the programs that calls only for improved Medicare benefits for seniors. The platform calls only for cutting “waste and abuse” in Medicare, using competitive bidding and other changes that leave benefits untouched.

Kerry has called Social Security’s problems manageable, and has promised to address them through economic growth, fiscal discipline and seeking bipartisan support for measures to fix the program.

Bush has said he favors overhauling Social Security to let people invest part of their payroll taxes into private accounts, giving them more control over their retirement and -- it is hoped -- boosting the return on their investments.

But Bush has yet to embrace a specific plan aimed at ensuring the program’s long-term health. And the transition to a partially privatized system is expected to cost about $1 trillion. That seemed more realistic when Bush campaigned on the issue in 2000 and the budget had large surpluses. And experts say Bush, like Kerry, has not spelled out the sacrifices that beneficiaries would likely face to save Social Security.

Said Robert L. Bixby, head of the budget watchdog group Concord Coalition, “Everyone is walking around with free-lunch plans.”