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Jewish World Review Sept. 10, 2001 / 21 Elul 5761

Bill Schneider

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Consumer Reports

What Dubya knows
about the budget

http://www.jewishworldreview.com -- THE plunging surplus has given Democrats a new issue --- the budget. How odd, then, that President Bush went to Harry S. Truman High School in Independence, Mo., to defend his budget policy. What was the President doing there? He was betting that Republicans will have a better issue --- the economy.

In Harry Truman's day, Democrats were protectors of the economy and Republicans were protectors of the budget.

That meant Democrats were the party of "more'' and Republicans were the party of "less.'' Now those positions seem to have reversed. Democrats are wringing their hands over deficits. And Republicans are defending tax cuts as an economic stimulus.

President Clinton gave Democrats a whole new image. He committed his party to fiscal responsibility: "This above all -- reduce the deficit.'' To which Al Gore added, "And guard the lockbox.''

Now with the economy slowing and the budget surplus diminishing, Democrats can claim their issue. "The surplus has all but evaporated,'' Sen. Dick Durbin (D-Ill.) said. "Now we are knocking on the door of raiding the medicare and social security trust funds just to maintain the expenses of government.''

What can Republicans say? They can say, nonsense. There's still a huge surplus.

"The federal budget will have the second largest surplus in history,'' President Bush told his audience in Missouri. Which is true, if you count the social security surplus. That was common practice until a few years ago, when leaders of both parties agreed to put the social security surplus in a "lockbox'' and use it to pay down the national debt.

Now Republicans are saying, don't worry about the lockbox. "We have enough money to preserve and protect social security,'' the President reassured his audience. White House Budget Director Mitch Daniels backed up his boss: "The social security surpluses over the years happen to be more than enough to repay all the debt we can repay, and to leave enough money over for the reform of that system.''

But if the social security surplus is violated, won't the system become insolvent and benefits have to be cut? No. There is no lockbox. Never has been. "The idea of dips and raids and drains and so forth is really sort of a fictional Washington convention,'' Daniels said. "When the Democrats were in charge of the government, they spent every penny of those receipts on general operations.'' Nevertheless, the lockbox is a politically compelling fiction. Compelling enough for the Bush Administration to use an accounting gimmick to make the social security surplus appear intact.

Republicans insist the real issue isn't the budget. It's the economy. President Bush warned, "The slowdown is serious, folks. Make no mistake about it.'' Daniels summed up the Administration's position this way: "The budget of the government is in great shape. It's the economy that is not.''

Do they have a policy to stimulate the economy? Yes. White House economic adviser Lawrence Lindsey said, "Fortunately, the tax cut is putting a floor under the economy so that we don't get into any real economic trouble.''

Democrats complain that the tax cut threatens the budget. "Because the tax cut was so large, we virtually have no room to do all of the other things that we need to do to run the government,'' Senate majority leader Tom Daschle said. But Democrats can't deny that cutting taxes helps the economy. "I'm glad we have this tax cut going out because it might help us get out of the slowdown that we're in,'' House Democratic leader Dick Gephardt said.

As a result, there may be only one option left for Democrats. Gephardt described it -- to the astonishment of his fellow Democrats -- in an interview on "Meet the Press'' last month. ~~ "You can make cuts in defense, you can make cuts in domestic programs,'' he told moderator Tim Russert.

"Which ones?'' Russert asked.

"You can go down the whole list,'' Gephardt replied. "Education, health care ''

"Across the board?''

"You can go across the board.''

That doesn't sound like the party of Harry Truman. It sounds like the party of "less.'' Less spending, and maybe a smaller tax cut. "If you look at the whole tax cut, if you trigger it, if you make some minor adjustments in it and watch spending, I think you can get this budget straightened out,'' Gephardt said.

President Clinton's experience taught Democrats there is only one real solution to the budget problem. "The best way to get rid of a deficit is to get the economy to move,'' Gephardt said. But guess what? It's now Bush's economy. As in Daschle's assertion last week that "the Bush economy is souring.''

From the 1930s to the 1980s -- right through the Truman era -- the GOP was the party of fiscal responsibility. It did them no political good. President Reagan put that tradition at risk with his massive 1981 tax cut. It did the Republicans no harm. Of course, Reagan could blame the deficit on the refusal of the Democrats in Congress to cut spending. President Bush can do the same thing. "We must resist the temptation of a bigger threat to growth, and that's excessive federal spending,'' he told his audience in Missouri. This time, the Democrats are in no position to disagree.

In a weak economy, it's not good politics for Democrats to call for austerity. And if the economy turns around, their budget issue will disappear. It's not the budget, stupid. It's the economy.

To comment on JWR contributor William Schneider's column, please click here.


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© 2001, William Schneider