Banking on $4.6 Trillion, the Nominees Get Generous

Most people could get by on $4.6 trillion. But for the two presidential candidates running during the first period of sustained federal surplus in American history, it is proving a stretch.

By their own accounts, Vice President Al Gore and Texas Gov. George W. Bush are advancing budget plans that use almost all the extra money Washington expects to collect over the next decade. According to their opponents, each plan outstrips the surplus by at least $1 trillion.

“That’s the kind of mistake that could really hurt the economy,” said Nicholas S. Perna, a veteran economist and visiting professor at Yale University.

Last week’s campaign events demonstrated one of the chief reasons for the pile-up of campaign budget commitments. This has become the year of the hefty policy proposal.

Bush started the bidding Tuesday by rolling out a near-$200-billion plan to overhaul Medicare and offering a partial prescription drug benefit for seniors. Gore countered with a 191-page economic plan that pulled together the $1.5 trillion of tax breaks and spending programs on which he has run all year.

Both candidates accompanied their proposals with exhaustive 10-year budget projections, a level of detail until now unheard of in presidential politics and one that some analysts found troubling. “It’s a big step backward, talking in 10-year numbers. Nobody can say anything accurate,” said Rudolph G. Penner, a former director of the Congressional Budget Office.

Medicare notwithstanding, Bush generally has gone for the bold stroke in his campaign proposals and has sought to avoid niggling details. Gore, by contrast, has reveled in specifics, even when they seemed to step on his own rhetoric. The weak links in each man’s plan follow the same lines.

Take Bush’s call for permitting private investment of some Social Security taxes.

Bush wants to divert some--aides suggest 2 percentage points--of the 12% annual payroll tax that underwrites the huge retirement savings system into individual accounts people could use to invest in the stock market.

The plan seems appealing, especially given that Social Security is running a surplus and so apparently has funds to funnel into the accounts without draining money away from current retirees. But what happens when the baby boom generation begins retiring early in the next decade and the system has to draw down the surplus?

Bush “has got to come up with an extra $1 trillion,” said Ron Klain, a senior Gore advisor. “It blows a fatal hole in his plan.”

Bush aides said that there are lots of ways to solve the problem, including getting the money from general revenues or borrowing it. But they will not be pinned down on specifics.

“What we’ve done is lay out a series of principles and a political commitment to private accounts,” said Larry Lindsey, the GOP candidate’s chief economic advisor. But that’s as far as the campaign will go, he said.

There seem to be other problems with Bush’s budget plan as well. For example, the Republican nominee has assaulted Gore and President Clinton concerning military readiness, charging--among other things--that the nation has been left exposed to attack by the administration’s failing to deploy a missile defense system.

But Bush has allotted only $45 billion for extra defense spending through 2010, none of it, according to aides, for a missile shield. Paying for a new system could cost anywhere from an additional $40 billion to $400 billion.

However, Bush isn’t alone in advancing proposals that suffer a mismatch of rhetoric and reality. Consider Gore’s stirring call at last month’s convention for federal funding of preschool programs.

“Let’s set a specific new goal for the first decade of the 21st century,” the vice president told delegates: “high-quality, universal preschool available to every child in every family all across the country.”

Republicans and some independent analysts said that the price tag for such a program could be $100 billion or more over 10 years. But Gore’s budget plan includes only $50 billion.

How would the Democratic candidate hold down costs?

He would remove 3-year-olds from the mix and require states to pick up half the cost. “The plan is for universal preschool for 4-year-olds,” a Gore aide said.

Or consider Gore’s proposal for doubling federal funding on biomedical research. “Within a few years,” the vice president said during his convention speech, “scientists will identify the genes that cause every type of cancer. We need a national commitment equal to the promise of this unequaled moment. So we will double the federal investment in medical research.”

The problem, Gore aides conceded, is that the doubling would not occur within a few years or even within a Gore first term but only by 2007 or 2008. And even then the doubling would only be of the amount that the National Institutes of Health provide in outside grants, not what it has available to spend on its huge internal research operation.

Overall, Gore has said that he would reserve the surpluses being collected by Social Security and Medicare--about $2.8 trillion of the $4.6 trillion in extra money between now and 2010--for use by those programs. He has said that the cost of his new tax breaks and spending programs could be covered by the remaining $1.8 trillion of surplus with $300 billion to spare.

Bush and his allies asserted that Gore would miss the mark by anywhere from $27 billion to $1 trillion.

Meanwhile, Bush has said that he can keep his proposals--including his $1.3-trillion tax cut plan--in the same bounds and end up with a $265-billion cushion. Gore asserts that his GOP rival would be off by at least $1.2 trillion.

Independent budget analysts said that the point-counterpoint of budget numbers masks the fact that both candidates are being remarkably restrained for a period of such plenty. In treating at least Social Security surpluses as sacrosanct, each has committed himself to saving more than half the extra funds Washington expects to collect in the coming decade.

“It may not look it, but these guys are being pretty fiscally conservative,” said Penner, the former CBO director.

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Poll Watch

Democrat Al Gore has definitely closed the gap with Republican George W. Bush. Nationwide polls among likely voters show Gore either slightly leading in the presidential race or tied with his GOP rival. Among third-party candidates,

Note: All polls surveyed likely voters. Margins of error range from +/-3 percentage points to +/-4 percentage points.

Compiled by MASSIE RITSCH / Los Angeles Times