COLUMN RIGHT/ PAUL CRAIG ROBERTS : Deficit Trust: This Dog Won’t Hunt : Moderate economic growth will close the gap naturally--if spending doesn’t exceed revenue.

When President Bush proposed a trust fund to use tax dollars to reduce the deficit, candidate Bill Clinton and others now in his Administration, such as deputy budget director Alice Rivlin, called it a gimmick. But times change, and Bush’s “gimmick” is now the new tire that President Clinton has put on the tax jalopy that he is trying to sell to the American people.

“Look at the tire, not the car,” says Clinton. “See my trust fund, not the tax increase.”

And Clinton tells us that we can’t trust Washington.

Has everyone forgotten David Stockman’s and Pat Moynihan’s Social Security trust fund? To justify an increase in the payroll tax in 1983, the politicians promised not to spend the money or use it for deficit reduction. Instead, it would be put in a “trust fund” and saved to pay future Social Security benefits.

In reality, the money was spent as fast as it came in. Today there is nothing in the trust fund except IOUs from the Treasury.

The deficit reduction trust fund won’t be any different. It cannot be otherwise as long as government persists in overspending its revenues.

Clinton’s budget plan does not stop government from overspending its revenues. Indeed, Clinton admits that his plan would add about $1 trillion to the national debt over the next four years even with the higher taxes.

That Clinton would resort to such a discredited gimmick as the trust fund shows how determined he is to funnel a larger percentage of our hard-earned incomes to Washington.

Clinton deserves his gimmick, and Congress should let him have it. It would be a deadly trap, because any audit of the trust fund would show nothing but government IOUs in it. Then Clinton could be asked what he had done with the money. Impeachment proceedings could begin. At his trial, he would have to say: “There’s not supposed to be any money in it--it’s only a political gimmick.”

Even if it weren’t a gimmick, the trust fund would never contain the promised sums. The reason is simple: The tax increases will not bring in the revenues that Clinton has projected. The revenue projections are based on the assumption that the higher taxes will not cut into economic activity. This is a stupid assumption and is really a far greater gimmick than the trust fund idea. Clinton needs to ask his advisers to explain how hundreds of billions of dollars can be siphoned out of consumer spending, personal savings and corporate revenues and still have the same amount of goods and services sold, people employed and business profits and investment.

Obviously, the big energy tax and the increased tax rates on Social Security, personal and corporate incomes would hit the economy hard. The most probable result would be an economic recession. Clinton would find, as Bush did before him, that his deficit-reduction tax hike failed to bring in the projected revenues. Then Clinton would have to explain the whereabouts of the money missing from the trust fund.

It is a simple matter to reduce the deficit. No new taxes and no real spending cuts are needed. The natural state of the economy is to grow, unless government policies knock it into recession. When the economy grows, the tax base grows and the same tax system brings in more revenues. Moderate economic growth will generate about $60 billion to $65 billion in new revenues each year, a figure that will grow with the economy.

To reduce the deficit, all the government has to do is to hold the increase in its spending below this natural growth in revenues. For example, if the government spent only $40 billion more each year than in the previous year, the budget deficit would decline by about $25 billion a year. This beats every budget plan and requires no sacrifice other than that government not be excessively greedy.

Even if government spent all of the natural growth in revenues each year, the budget deficit would stabilize and stop growing. Indeed, it would be shrinking in size in relation to the growing economy.

We have a deficit problem for only one reason: Each year, the government adds to its previous year’s spending more than the natural growth in tax revenues.

The solution to the deficit is not another gimmick, but for government to stop adding to its spending more than economic growth adds to its revenues.