Old Way vs. Bold Way at Crux of Surplus Debate

As the federal budget moves into surplus, can the nation afford costly new initiatives?

In both the Democratic and Republican presidential campaigns, that question is moving to the center of the domestic policy debate.

After years in which the goal of eliminating the federal deficit has compelled both parties to limit their proposals, Republican George W. Bush and Democrat Bill Bradley are promoting ideas with 10-year price tags that potentially exceed $1 trillion. In contrast, Vice President Al Gore and Sen. John McCain (R-Ariz.) are positioning themselves as the guardians of fiscal responsibility--questioning whether the country can afford these proposals without endangering Social Security, Medicare and the hard-won improvement in the government’s balance sheet.

What’s emerging is a test of the fiscal strategy that has dominated Washington under President Clinton--an approach that has emphasized balancing the budget and, more recently, reducing the federal debt. That, in turn, has left room for only relatively modest policy initiatives, either in new spending or tax cuts.

In parallel dissents, both Bush--with a massive tax-cut plan, and Bradley--with a comparably ambitious proposal to expand access to health care--are confronting that consensus.

“For challengers, you have to try to offer something outside the box,” says Will Marshall, director of the Progressive Policy Institute, a centrist Democratic think tank. “They are both saying they are not going to simply inherit the Clinton-Gore framework; they are going to try to change it.”

These matching pushes from left and right are providing Gore’s campaign with a new focus: Day after day, he is attacking both the Bush and Bradley proposals as dangerously expensive. “George W. Bush and Bill Bradley are two peas at separate ends of the same pod,” Gore charged in an interview last week. “They both eliminate the entire surplus on risky schemes that push us right back into [budget] deficits and threaten our economic recovery.”

McCain Questions GOP Rival’s Plan

McCain so far has not challenged Bush’s tax plan as forcefully. But, more cautiously, he is striking similar notes as he questions whether Bush’s proposal would leave enough money to bolster Social Security and could be funded out of the surplus. Tonight’s GOP debate in Iowa should give him a prime opportunity to stress such concerns.

The Bradley and Bush proposals would seem well tailored to the party activists who vote in primaries: GOP voters like tax cuts, just as Democratic voters generally like new spending. But in placing greater emphasis on fiscal discipline, Gore and McCain may benefit from a public reluctance to tamper with a policy mix that has contributed to the roaring economic expansion.

“This is a tough environment right now to advocate change,” says Steve Moore, director of fiscal studies at the libertarian Cato Institute and a supporter of the Bush tax plan. “People don’t want anything right now; they are very comfortable with the status quo.”

Following the lead of both Clinton and Congress, each of the four leading presidential contenders has pledged to use the surplus accumulating in the Social Security trust fund to pay down the national debt. That means to finance new programs, the candidates are counting only on the surplus in the government’s operating budget, estimated at about $1 trillion over the next 10 years.

Though the candidates aren’t reflecting it in their calculations, most budget experts consider even that estimate overly optimistic because the numbers assume Washington will maintain stringent caps on domestic spending that it already breached this year.

Center of Gravity for Democrats at Issue

The argument between Bradley and Gore amounts to an intriguing test of Clinton’s success at changing his party’s center of gravity. Bradley has repeatedly denounced the Clinton administration for thinking too small, and has used the traditional liberal language of social obligation to make the case for major new social policy expenditures--particularly his sweeping plan to provide health care for the uninsured. “It is not . . . a question of money,” Bradley insists. “It is a question of will.”

In response, Gore has insisted that government activism must be bounded by fiscal responsibility. Gore has adapted the arguments Clinton has used against Republican tax cut plans--contending that the cost of Bradley’s proposals would deny funds needed for Medicare and throw the budget back into deficit, thus endangering the economy.

In a party where compassion has traditionally been measured by the willingness to spend, Gore strikingly places more emphasis on maintaining the health of the private economy; he insists that new government spending cannot be so large that it threatens the fiscal discipline contributing to the economic expansion.

“The key question is how do you keep the prosperity going,” Gore said in last week’s interview. “I’m all in favor of social spending. I’ve proposed a good bit more of it in the budget I’ve put out. But it’s only one arrow in the quiver, and economic growth is the most important means for providing . . . opportunity.”

At times, the two rivals differ more in degree than kind. Gore has pledged to keep the budget in balance every year if elected; Bradley hasn’t made such an explicit promise, but aides say he has constructed his agenda on the assumption that he would too.

Bradley has said he won’t rule out a tax increase to pay for his health care plan if the surplus proves insufficient. But he says he has no plans to raise taxes. Gore has been somewhat more emphatic in renouncing higher taxes--”I do rule out tax increases in anything that approximates our current economic circumstances,” he says--but he has resisted a read-my-lips pledge never to raise taxes under any circumstances.

The biggest difference may be that Bradley appears more willing to make commitments that could expose him to greater risk of a future fiscal shortfall.

Gore, like Clinton, has proposed a long list of new programs, but the vast majority of them are of modest size. On paper, at least, that leaves him with enough to allocate about $250 billion from the anticipated surplus toward bolstering Medicare--whose rising cost is expected to strain the federal budget as baby boomers retire.

Bradley’s health care plan, by contrast, is so large that it would either consume most of the surplus (by his estimate) or more than the total anticipated surplus (by the calculation of one critical study), leaving little or no extra funds for Medicare.

Gore maintains that launching such an expensive new program would virtually guarantee future deficits or tax hikes, especially as Medicare costs rise. Bradley’s camp insists the real difference is that the former New Jersey senator is more willing than Gore to target his priorities.

“Gore wants to have a significant tax cut [estimated at $217 billion over 10 years]; he wants to increase defense spending by $127 billion,” says Anita Dunn, Bradley’s communications director. “That would be a good argument to have in a Democratic primary: my priorities versus his priorities. What is dishonest is his attacking us for spending the surplus when he would spend it, and probably more.”

Gore sharply disputes that characterization, noting that he has released 10-year figures showing how his proposals would fit into the anticipated surplus.

The GOP debate is developing along a parallel, but distinctly less confrontational, track. Mindful of his party’s attraction to tax cuts, McCain has been careful to avoid directly suggesting that Bush’s proposed reduction is too large (as Gore has done).

Instead, McCain is emphasizing more traditional notes of fiscal responsibility.

By questioning Bush’s reliance on the surplus to pay for tax cuts, McCain has implicitly raised the specter of renewed budget deficits.

While the 10-year cost of Bush’s tax plan has been estimated at $1.1 trillion to as much as $1.7 trillion, McCain has proposed a much more targeted $530-billion 10-year cut, with $230 billion coming from the anticipated surplus and the rest from “closing corporate tax loopholes and ending unnecessary spending subsidies.” McCain would allocate the other $770 billion of the projected 10-year operating budget surplus to Social Security, Medicare and debt reduction.

The Republican fiscal debate isn’t as starkly polarized as that of the Democrats. For one thing, while McCain is subtly implying that Bush’s tax cut is too big, conservatives Gary Bauer and Steve Forbes are loudly insisting it’s too small.

And Bush has no intention of ceding the high ground of fiscal responsibility: He’s planning to propose a series of specific spending cuts next year.

It may, however, be a measure of McCain’s success so far at challenging Bush’s math that the Texas governor is delaying his release of those proposals until after the GOP primaries.