Perot's Deficit-Reduction Plan

July 27, 1992

Preliminary peaks at the pain pills Ross Perot was about to prescribe for the sickly American economy should produce instant nostalgia for the campaign that might have been. Compared to the smoke-and-mirrors budget plans of George Bush and Bill Clinton, the Perot plan is a model of fiscal responsibility. Even if its bitter ingredients would have insured the Texas billionaire's defeat and alienated many of his enthusiasts, it would have set a worthy standard by which to measure what the established party candidates have to offer.

Mr. Perot, if he had stayed the course, would have attacked such sacred-cow entitlement plans as Social Security, Medicare, Medicaid and farm subsidies whose soaring costs are pushing the country ever deeper into debt. He reputedly would have lowered cost of living increases or, in the case of retirement benefits, treated a larger share of them as regular income subject to income taxes.

This has long been seen as a major step to bring the budget under control, but the gray-power lobby has intimidated politicians wanting to do something about it. President Bush, in his budget, raised the prospect of putting a cap on entitlements but not in the convincing fashion of the reported Perot proposals. Governor Clinton is merely calling for a $4 billion cut in programs that by 1996 may cost an astounding $900 billion.

What is phony about the Republican approach is that it pretends tax cuts will spur economic growth, increase government revenues and thus reduce the deficit. What is phony about the Democratic counter-offer is that it maintains increased government spending will accomplish the same thing. The Perot approach adheres more closely to three criteria for real deficit cutting set out by the Committee for a Responsible Budget: "Cut spending, raise taxes or do both."

The Perot plan would raise revenues by sharply boosting gasoline taxes, raising income tax rates for the wealthy, reducing mortgage interest deductions on expensive homes and curbing business expense tax breaks. On the spending side, Mr. Perot's draft blueprint would cut defense spending an added $40 billion over the next four years and is more modest in its domestic public works program than the Clinton economic plan. The goal, which appears more credible and ambitious than the Bush and Clinton offerings, would aim at balancing the budget in five years with deficit reductions in the $700 billion to $800 billion range.

Perot spokesman Jim Squires suggests the predictable adverse reaction from an American public conditioned to sugar pills was one factor in the independent candidate's withdrawal from the race. He says Mr. Perot "was more comfortable showing this plan to the country as a non-candidate than he could possibly be as a candidate."

The trouble with that theory is that non-candidates have less clout. It leaves the actual setting of economic policy to politicians and political parties demonstrably not up to the challenge.

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