The New York Times
One party claims that the budget surplus will be small, and that a central goal should be to eliminate the debt. The other says the surplus will be big, and we can do ambitious things with it. You'd be forgiven if you thought that the first party was the Republicans and the second the Democrats. But it's actually the reverse. The Democrats are marching under the banner of fiscal austerity, and the Republicans proclaiming this the era of large ambition.
"Here's the facts," said George W. the other day, pointing to the latest estimate from the Congressional Budget Office showing that the nation could well afford his plan to trim income taxes by $1.3 trillion over ten years and still have enough money to fund social programs.
But in his new budget, released today, the President claims the surplus that's left over after saving all Social Security receipts is a little more than half that sum -- $746 billion over ten years. The President's estimate is even smaller than the most conservative projection coming out of the Congressional Budget Office, which foresees the non-Social Security surplus being at least $838 billion, and possibly as high as $1.9 trillion.
The Administration's budget also makes retiring the debt the nation's biggest single financial priority, outside of saving Social Security. "Let's make America debt-free for the first time since 1835!" the President exuded the other night in his State of the Union. His new budget seeks to pay off the entire $3.6 trillion tab by 2013. Granted, the new budget also provides a buffet of attractive policy ideas, few of which will be enacted by this Republican Congress in this election year. But debt elimination trumps any of them.
Meanwhile, the Vice President has been running around the country blasting George W. and rival Bill Bradley for counting on budget surpluses to fund their big tax cuts or spending plans, respectively. Gore said he'll pursue debt reduction even if the economy slows, "just as a corporation has to cut expenses if revenues fall off," adding that a recession "should be viewed as an opportunity to push [cuts] further before any other options are considered."
Even House Democratic Leader Dick Gephardt is sounding a bit like Calvin Coolidge these days. "Until the money is in the Treasury," he said last week, Congress shouldn't make new promises. "If and when it materializes," we should use the surplus for Social Security and Medicare. And what of the non-Social Security surplus that Republicans are drooling over? Use that for "paying down the debt, and honoring our existing commitments to health and education." Those existing commitments aren't much to write home about, Dick.
It would be one thing if the born-again fiscally-austere Democrats were speaking out of strong conviction backed by sound ideas. But the conviction is paper thin. Eliminating the national debt has not been a plank of any Democratic economic program in living memory, and most Democrats who are now talking gravely about its importance have never uttered the words "eliminate the debt" in their lives.
Besides, eliminating the debt shouldn't be the nation's goal. As long as the debt doesn't rise as a proportion of national product (and it's been falling now for several years), the important issue isn't how large it is in absolute dollars but what the borrowed money is used for. Borrow to give all our nation's kids good schools and healthy bodies and that's a smart investment -- no less important to America's future prosperity than any private-sector machinery or real estate made slightly cheaper because the government's debt, and thus interest rates, were otherwise lower.
So why are Democrats sounding like Coolidge Republicans? Because they're spooked by Republican plans to cut taxes, and they haven't the confidence to build public support for an equally ambitious program centered on education and health care.
When the surpluses first began ballooning, the President dealt a body blow to Republican tax cutters by telling the public the choice was between cutting taxes or saving Social Security. ("Social Security First!") But when the surpluses continued to mount, the Republicans handed the President a $792 billion ten-year Republican tax cut that wouldn't touch Social Security revenues. The President vetoed it, but the die was cast. The White House felt it had no alternative but to play the debt card if the tax cutters were to be stopped in an election year. The rest of the Democratic party establishment is falling into line.
The Democrats are wrong on three counts. First, the public isn't nearly as eager for a Republican tax cut as Democrats fear. During the 1990s, incomes soared only at the top rungs of the ladder, meaning that most tax revenues are now coming from the well off. Over 30 percent of income tax revenues are now collected from the top 1 percent of earners, 60 percent from the top 10 percent. Every Republican tax-cutting plan gives most of the money back to the people from whence this money came, leaving peanuts for most other Americans -- and the voters know it.
Second, it's plain dangerous to make the elimination of the national debt a core goal of public policy. Not only is it dumb on economic grounds ("he should wash his mouth out with soap," Nobel-laureate economist Robert Solow was quoted as saying in the Times, on hearing of Gore's plan to continue to pay down the debt even when the economy slows), but it puts the Democrats in a straightjacket when it comes to any future proposal for universal health care or universally good schools.
Which brings us to the third problem with it. In case anyone hadn't noticed, this is an election year, where the real issue isn't whether you believe the CBO or the OMB budget projections, but what we as a nation should be aiming to do. "Eliminate the Debt!" is not the sort of rallying cry likely to inspire many loyal Democrats to vote next November, nor even ignite many of the passions of Independents.
If the Democrats stand for anything it should be for helping the little guy who's got relatively little out of this buoyant economy so far. Not incidentally, little guys include most voting-age Americans. Little guys could get passionate about good health care and good schools. But faced with a choice between tax cuts for the big guys or fiscal austerity, the little guys may well decide stay home.
