Final Warning Bell

January 07, 1993

President-elect Clinton had it right when he described President Bush's last budget, with its horrendous $292.4 billion deficit projection for fiscal 1994, as a "final warning bell" that the red ink must stop. But will he and the new Democratic Congress answer the bell? Failure to deal with soaring debt problems has been a bipartisan debacle in both the executive and legislative branches.

First, some figures: In Mr. Bush's four years, the national debt rose an astounding $838 billion, or $209.5 billion a year. This compared to an average of $167.6 billion annually under Ronald Reagan, $56.72 billion under Jimmy Carter, $64.95 billion under Gerald Ford, $11.16 billion under Richard Nixon and $8.96 billion under Lyndon Johnson.

Nor are matters likely to improve. The national debt, which quadrupled in the Reagan-Bush years to above $4 trillion, is headed over $5 trillion in Mr. Clinton's term. And this may be a modest figure. While Mr. Bush projects slight deficit declines in fiscal 1995 and 1996 as the savings and loan bail-out ends, it then sees a renewed upward trend to record levels.

The trouble with these numbers is that they are not credible. Government estimates in recent years have been consistently too optimistic, and there is no internal evidence that Mr. Bush's final budget is any different. Democrats suspect he may be low-balling it to compound their problems.

Whatever political buck-passing is going on during this transition period, it will stop at Mr. Clinton's desk in just a matter of days. The new president promised during the campaign that he would halve the deficit by the end of his four years. Frankly, we don't think he can make it. He is under liberal pressure to increase spending on public works and worker training to stimulate the economy. He also has to decide what to do about his election-year palaver about a "middle-class tax cut." Both steps, if carried out, would boost the budget beyond Mr. Bush's estimates.

The toughest problem facing the new administration is what to do about Medicare and Medicaid costs, which have been growing at more than 10 times the rate of inflation. Mr. Clinton is dead right that deficits cannot be brought under control unless soaring health care costs are contained. But he also is committed to expanding coverage, which will hardly reduce spending.

The president-elect and the Democratic Congress will have to raise revenues and cut spending. There is just no other way to deal with the debt calamity. The 1990 cap on discretionary spending should be continued. Entitlement costs should be brought down by taxing the benefits received by well-to-do citizens. And consideration should be given to taxes on energy and consumption. If he does not take action, if he does not answer the final-warning bell, Mr. Clinton could wind up as much a fiscal failure as Mr. Bush.

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