Campaign Debate Over Deficit Curiously Tame : Most Candidates Talk as if Substantial Spending Cuts or Tax Hikes Are Worse Than the Shortfall

When Sen. Sam Nunn (D-Ga.) announced this summer that he would not run for President, he told several intimates that one reason was the danger that President Reagan’s successor would be dragged down by a major economic disaster created by the last six years of gaping federal deficits.

“Someone will have to be Herbert Hoover,” Nunn mused privately, “before there can be another Franklin Roosevelt.”

Nunn’s hyperbole may be open to question, but there is little dispute that the chronic budget deficit ultimately threatens the nation’s economic health.

Yet the campaign debate over the deficit seems curiously tame and hopelessly confused. Only Democrats Jesse Jackson and former Arizona Gov. Bruce Babbitt propose specific revenue raising measures: Babbitt wants a national sales tax and Jackson suggests a variety of tax hikes. The remaining 10 candidates who are running for President talk mostly as though substantial spending cuts or tax increases would prove more dangerous than the disease.

The candidates seem trapped by a political paradox: Although voters consider the deficit the most serious problem facing the nation, they are unwilling to endorse solutions that carry even a mildly painful cost.

“The public isn’t willing to pay higher taxes or tolerate serious spending cuts” just to cut into a deficit that has no immediate adverse impact on them, said William Schneider, a fellow at the American Enterprise Institute and political analyst for The Times.

Nevertheless, some important differences on budget issues emerged among this year’s candidates in written responses to a series of questions from The Times.

Republicans generally lined up against tax increases of any sort. They also uniformly refused to outline any specific plans for narrowing the budget gap. Democrats, by contrast, refused to rule out new taxes, although except for Babbitt and Jackson they ducked the issue of whose taxes should be raised in any deficit-reduction package.

As long as the economy continues to plow ahead, analysts say, the candidates are not likely to find any political payoff in attacking the deficit more vigorously. Democrats are particularly wary because they remember that Walter F. Mondale was trounced in 1984 when he based his campaign against Reagan on the argument that the nation’s prosperity could not be sustained unless Americans accepted higher taxes to wipe out the deficit.

“A lot of experts have been crying wolf for six or seven years,” said Robert Eisner, an iconoclastic liberal economist at Northwestern University and author of a book challenging deficit figures as a misleading guide to public policy. “We’ve had large real deficits and there hasn’t been a disaster. Maybe people are right to think that something else is going on.”

Among the presidential candidates, even Sen. Bob Dole of Kansas, who has stressed his willingness to tackle the deficit issue more than any other Republican hopeful, has avoided offering any specifics.

Making ‘Tough Choices’

“What we need are leaders willing to make the tough choices,” he said in response to The Times’ questionnaire. “I certainly would be.”

But he proposed little more than, as “one of my first acts as President, (to) convene a summit meeting of congressional leaders and Cabinet officers to sit down and hammer out a responsible, doable deficit-reduction program.”

For Vice President George Bush, the deficit is a particularly difficult problem because of his ties to Reagan Administration policies that will leave the next President saddled with a national debt of about $2.5 trillion, more than double the $1-trillion debt that existed when Reagan entered office in 1981. While Bush, like Dole, comes from the Republican tradition that regarded deficits as an unmitigated disaster, he is equally vague about his own approach.

“Raising taxes would only hurt the tremendous economic recovery we have had in our Administration,” Bush said. In fact, Bush came out last week in favor of cutting the capital gains tax nearly in half.

“So the first priority,” he said, “is to hold spending.”

But by vowing to maintain high defense spending levels and protect the elderly from any changes in Social Security, he left only about one-third of the federal budget to absorb the full brunt of any spending cuts.

Rep. Jack Kemp of New York, who dismisses the deficit as a secondary problem, argues that faster economic growth alone will narrow the gap.

‘A Symptom of Problems’

“The deficit is a symptom of economic problems,” Kemp said, “and can be substantially reduced by a combination of a tight lid on spending, domestic and international monetary reform to reduce interest rates and a tax policy that provides incentives for work, saving and investment.”

Most Democratic hopefuls are just as wary of proposing anything that hints of belt-tightening. And the problem posed by the deficit is all the knottier for them because they are eager to launch new programs in support of education and other social goals.

“We must have an even-handed approach that ensures a strong economy and military but that also makes the necessary investments in our nation’s most important resources--our people,” said Rep. Richard A. Gephardt of Missouri.

Gephardt said his goal would be to “reduce the deficit by $30 billion to $40 billion annually, working our way back to a balanced budget.” But he also said any deficit reduction plan “must be flexible” and proposed little more than “restructuring federal contracting procedures” and periodically reevaluating existing federal programs.

Like Gephardt, Tennessee Sen. Albert Gore Jr. proposes to spend more money now in hopes that it will reduce spending requirements in the future.

‘Investing in the Future’

“If we are to enter the 21st Century with a responsible budget, we must begin by investing in the future today,” Gore said. “The Reagan Administration has spent the last seven years insisting that we can cut our way to prosperity--slashing housing for the elderly here, hacking funding for child nutrition there. That policy is dead wrong.”

Sen. Paul Simon of Illinois goes so far as to claim that a massive new federal jobs program would actually trim the deficit.

“The best path to deficit reduction is through job creation,” he said. “For every percent we reduce unemployment, the deficit falls by $30 billion. If we cut unemployment in half, we eliminate the deficit.”

Regardless of the intrinsic merits of a federal jobs program, though, Simon’s reasoning is mistaken. The Congressional Budget Office estimates that economic growth strong enough to cut the unemployment rate by one percentage point would generate budget savings of about $40 billion, mostly by swelling personal tax payments and by reducing jobless outlays.

But if the federal government simply hired the unemployed itself, the cost of paying workers’ salaries would far outweigh the extra tax revenues the workers would generate.

Babbitt More Daring

Babbitt, struggling to get recognition for his dark-horse campaign, has been more daring than any of the other candidates in presenting his economic ideas. “To reduce the deficit as President,” he said, “I will both cut spending and raise revenues. I will refuse to sign one bill without the other.”

He is the only Democratic candidate to propose limits on the largest budget category--Social Security and other popular benefit programs for the middle class--by suggesting that middle- and upper-income people should receive fewer such benefits. Babbitt would apply what he calls a “universal needs test” to “every government expenditure--from farm programs to defense.”

Babbitt proposes a national sales tax that “should be structured progressively, with exemptions for food, medicine and housing, and/or income tax relief for working people. A 5% tax would generate $40 to $60 billion a year depending on how it was structured,” he said.

Jackson offered a laundry list of tax increases. His chief suggestion is that for one year, tax brackets and personal exemptions should not grow with inflation, a change he says would boost taxes by an estimated $9 billion.

He would also impose a $5-per-barrel oil import fee to generate $6.6 billion a year and raise the top income-tax rate for those with very high incomes from 28% to 38.5%. He predicts that he could generate an additional $10 billion by offering a tax amnesty program to collect unpaid taxes.

Would Cut Defense

On top of that, Jackson would wipe out a number of defense programs, including the land-based MX missile, the submarine-launched Trident 2 missile, sea-launched cruise missiles and the proposed Midgetman missile. He would reduce the Navy buildup. And like all of the Democratic candidates, he would restrict Reagan’s space-based anti-missile program--called the Strategic Defense Initiative--to basic research.

Massachusetts Gov. Michael S. Dukakis warned that rigid adherence to the Gramm-Rudman budget targets, which now call for steady deficit cuts to achieve a balanced budget by 1992, threaten to trigger a “serious and possibly worldwide recession.”

While not ruling out new taxes, Dukakis said his first step would be to try to improve efforts to collect unpaid taxes. While some experts are skeptical about how much additional revenue can be generated by tougher tax enforcement, Dukakis cited two studies contending that as much as $47 billion a year could be raised by a substantial increase in taxpayer audits.

Dukakis would avoid further domestic budget cuts and concentrate his spending cuts on the defense budget. But it is unclear how he would save money under his plan to “reduce spending on nuclear weapons and to improve our conventional capabilities,” a theme also sounded by Gore and Simon, because non-nuclear defense programs generally are more expensive than nuclear weapons.

Haig Urges Spending Cuts

Among the other Republican candidates, Alexander M. Haig Jr. suggested spending cuts of $20 billion to $30 billion in his first year to put the budget “on a ‘glide-path’ toward balance in the mid-90s.” Like the Democrats, he did not rule out tax increases, but he added: “I would not even look to revenues until every area of the domestic and defense budget has been scrutinized.”

Unlike most Democrats, though, Haig said he would not require the defense budget to absorb the bulk of spending cuts.

Former Delaware Gov. Pierre S. (Pete) du Pont IV, who has become an avid advocate of supply-side economics, offered a program similar to Kemp’s. “The budget deficit is certainly an important issue,” he said, “but there are other important considerations that must be included in the formation of fiscal policy.”

He emphasized the importance of keeping inflation under control and stimulating growth by holding taxes down. He said his chief budget goal would be to put a cap on government spending, and he promised to focus on eliminating the $26-billion farm subsidy program.

While former television evangelist Pat Robertson failed to respond to the questionnaire, he has supported Gramm-Rudman and suggested turning some government programs over to the private sector in hopes of saving money. But his tax plan, calling for expanding the costly personal exemption, would widen the deficit even further.

CANDIDATES AND THE ISSUES: BUDGET/TAXES/DEFICIT

REPUBLICANS Vice President George Bush

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Would cut spending to meet Gramm-Rudman targets. Believes the deficit is coming under control.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Opposes tax increases. Says the nation must maintain secure defense and protect Social Security.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: Yes.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Kansas Sen. Bob Dole

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Would abide by revised Gramm-Rudman targets, which call for $100-billion deficit in fiscal year beginning Oct. 1, 1989, and balanced budget three years later.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would convene a summit meeting of lawmakers and Cabinet officials to make tough choices. Argues more can be done to squeeze spending.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: Yes.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Former Delaware Gov. Pierre S. (Pete) du Pont IV

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Believes other economic goals are more important.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would cap government spending. Opposes any tax hike. Favors phasing out farm subsidies.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No response.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Former Secretary of State Alexander M. Haig Jr.

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Would cut $20 billion to $30 billion in first year to put deficit on “glide-path” toward balance in mid-1990s.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Before tax increases are considered, every area of defense and domestic spending should be scrutinized.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No; believes amendment unworkable.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

New York Rep. Jack Kemp

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Would offer a plan to balance the budget by end of term.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Believes a tight lid on spending, monetary reform and economic growth spurred by low tax rates would take care of the deficit problem.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Pat Robertson

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: No response, but publicly supports Gramm-Rudman.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: No reply, but on record against tax increases. Favors turning government programs over to private sector.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No reply.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: No reply.

DEMOCRATS Former Arizona Gov. Bruce Babbitt

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Depends on economic conditions at the time.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would cut spending and raise revenues in tandem. Would direct federal aid programs toward the needy and institute a 5% national sales tax that would exempt food, medicine and housing.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Massachusetts Gov. Michael S. Dukakis

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Deficit must be reduced, but original Gramm-Rudman target of a balanced budget in 1991 would cause a recession.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would strengthen enforcement of existing tax code before considering new taxes. Would redesign domestic spending programs to eliminate waste. Believes military spending can be cut through nuclear arms control while conventional forces are strengthened.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: Yes.

Missouri Rep. Richard A. Gephardt

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Can’t be done overnight. Would aim to reduce deficit about $30 billion to $40 billion a year.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would work with Congress. Necessary new investments should not be ignored. Favors reducing waste and fraud and periodically re-evaluating both spending programs and tax incentives.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: No.

Tennessee Sen. Albert Gore Jr.

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Would convene summit meeting of nation’s leaders within 90 days to forge national consensus on deficit-cutting measures.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Investment in the future is most important goal, so would propose “sensible” cuts to eliminate wasteful spending. Believes higher taxes are last resort. Argues significant reductions in military spending possible through nuclear arms control.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: Yes.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: No.

Rev. Jesse Jackson

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Depends on current financial conditions. Rigid targets should be avoided.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Would raise $32 billion a year in taxes by variety of measures and cut $20 billion from defense budget by eliminating a number of weapons.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: No.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: No.

Illinois Sen. Paul Simon

Q: How deeply should the budget deficit be cut during your first year in office, and how quickly should the budget be balanced? A: Creating new jobs for unemployed would eliminate the deficit.

Q: What specific plans do you have for reducing the deficit through domestic spending cuts, defense spending cuts and tax policy? A: Believes domestic spending has already been cut too far. Military spending can be cut by nuclear arms control. Instead of raising taxes, would put Americans to work.

Q: Do you support President Reagan’s appeal for a constitutional amendment requiring a balanced budget? A: Yes.

Q: Do you support President Reagan’s appeal for authority to sign spending bills while vetoing particular line items? A: No.