Political frauds

Robert Kuttner

September 04, 1992|By Robert Kuttner

IN THIS year of political exaggerations and just plain statistical frauds, such as the claim that Clinton raised taxes 128 times as Arkansas governor, one item deserves more than a moment's investigation. I am referring to the Bush proposal to let taxpayers solve the federal budget crisis.

Under the Bush plan, taxpayers could earmark up to 10 percent of their income taxes to reduce the federal debt. If all voters were to check off the full 10 percent, according to the White House, that would cut the debt by $50 billion a year, and eventually eliminate the federal deficit, too.

The plan has a certain populist appeal, since it purportedly bypasses the politicians and lets the voters decide. It comes in a year when voters are appropriately cynical about politicians, and politicians reciprocate by manipulating that same cynicism via phony plans to supposedly return power to the voters. Ross Perot's plan for electronic referenda fits the pattern. So do term-limitation initiatives, through which Republicans hope to mechanically break the voters' unfortunate habit of electing Democrats to legislatures.

Even in this context of political debasement, the Bush checkoff plan for the deficit hits a new low on cynicism. Here's how it would actually work (as Deep Throat cautioned, follow the money):

As a patriotic citizen, you decide to earmark $500 of your taxes for debt reduction. That means this year's federal budget has 500 fewer dollars to spend on other things.

Where does the government make up the missing $500? If you guessed that the government goes out and borrows it from somebody else, you're catching on. At the end of the day, the debt has been reduced by your $500 -- so that the debt can be increased by a different $500. Net effect on the debt: zero.

Ah, but here is the beauty part. For every dollar that taxpayers elect to cut the debt, says Mr. Bush, he will go out and find a dollar of program cuts. And indeed, if he were to actually do that, the checkoff really would reduce the current deficit -- though not the accumulated debt. (The deficit is one year's red ink; the debt is the sum of past years' red ink. You can't use the same money to reduce both.)

But if the president knows where to find tens of billions of dollars in politically bearable program cuts, why has he been hiding his light under a bushel? Since polls show that most voters want a lower deficit, why not just identify the cuts now?

The 1992 Republican platform is characteristically vague on just what to cut. The GOP, lest we forget, has been running the executive branch for nearly 12 years -- plenty of time to have rooted out easy "waste, fraud and abuse."

The usual charge that Democrats keep adding spending programs just doesn't wash. If you exclude Social Security (which the president went out of his way to defend) and the government's share of rising health care costs, federal program spending has been declining relative to personal income for several years. The president has used his veto more than 30 times to kill Democratic initiatives to shift taxing and spending patterns. The main item in the federal budget that has been increasing steadily for 12 years is interest payments on the debt.

The last time we had a true test of the two parties' budget priorities was at the Andrews Air Force Base Budget Summit of 1990. The Republicans did propose further cuts in some domestic programs (mainly Medicare and Medicaid) -- but they proposed no net deficit reduction because they wanted to offset program cuts with capital gains tax cuts aimed mainly at upper income brackets. The Democrats offered smaller program cuts and successfully demanded tax increases on the well-do-do.

The president is now politically exposed from both flanks. Conservatives are angry that he accepted any tax increases in 1990, and liberals are rubbing his nose in his support for cuts in Medicare.

Today, President Bush is simultaneously pedaling in opposite directions. He proposes a welter of new tax breaks -- tilted toward the top -- which would hike the deficit by tens of billions of dollars. Yet he is also trying to steal the Democrats' thunder by proposing new domestic spending programs at the same time.

During the last week of August, with no sense of contradiction, Mr. Bush demanded that the Democrats get serious about deficit reduction, offered a new, $2 billion job training program, proposed more tax cuts and called for a balanced budget. The taxpayer checkoff plan suffers from the same brand of delusion.

President Bush could perhaps profit by consulting my favorite family economist, fresh from the triumph of his first summer job, who is beginning to grasp, at age 18, that you can't spend the same hundred dollars on shoes, dates, long distance calls, and also put it toward a car. Unlike the president, my family economist does not enjoy unlimited borrowing authority.

Robert Kuttner writes a column on economics.

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