Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, April 9, 1993 TAG: 9304090105
SECTION: NATIONAL/INTERNATIONAL PAGE: A-3 EDITION: METRO
SOURCE: ROBERT A. RANKIN KNIGHT-RIDDER/TRIBUNE
DATELINE: WASHINGTON LENGTH: Medium
DEFICIT-REDUCTION PLAN RAISES DEBT: IT'S AMERICAN WAY
President Clinton's new budget would run up almost another $1 trillion in federal debt over the next four years, even though he is seeking the biggest deficit-reduction package in history.Confused? Welcome to "Federal Budget Land."
Clinton proposes almost $700 billion in higher taxes and lower spending over the next five years - lower spending, that is, compared to what would happen if Congress left all current programs on auto-pilot.
But Clinton proposes to spend about one-third of that $700 billion on his own priorities - education, worker training and the economic infrastructure (roads, sewers, technology).
His numbers still show a net deficit reduction of $514 billion over the next five years compared to how much deficits would grow otherwise. That would be the biggest deficit reduction program in history.
But his numbers also show that four years of his deficits from fiscal 1994 through 1997 would add $936.5 billion to the gross national debt - which now stands at $4 trillion. That's a pace of debt explosion akin to the records set by Ronald Reagan and George Bush.
Clinton's budget crunchers prefer to focus on the shrinking share their proposed annual deficits would take from the national economy, as measured by gross domestic product, the nation's economic output. The fiscal 1993 deficit equals 5.2 percent of GDP. Their plan would cut that to 2.8 percent of GDP in fiscal 1997.
Economists agree that's the best way to assess how big a drag each year's deficit puts on the economy; it's comparable to figuring how big a burden your personal debt is relative to your assets. If your debt is 50 percent of your assets, you may have a problem; if it's 5 percent, probably not.
But each year's deficit adds to the nation's total accumulated debt. Add another $1 trillion to the nation's $4 trillion debt - a 20 percent boost - and Clinton will run up the cost of servicing the total debt; that is, the bill for interest payments.
In fairness however, if the government acted too fast to end federal deficits, that could throw the economy back into recession. Most analysts say Clinton's program already will keep a lid on growth, holding it to about 3 percent a year.
"It's a first step," said Leon Panetta, Clinton's budget director.
But Panetta was frank to admit that deficits will start rising again each year beginning in 1998 unless health care costs are curbed. "The second step is adopting health care reform."
How do independent analysts evaluate Clinton's efforts to tame deficits?
"I guess the administration deserves some credit for making some very tough choices," said Susan Tanaka, vice president of the nonpartisan Committee for a Responsible Federal Budget. She cited Clinton's willingness to increase taxes on Social Security benefits as one example.
"If it were easy to eliminate the deficit, we would have done it by now. Clearly, while we might fault the administration for not going far enough fast enough, we really ought to look at ourselves and say, `Would it have been doable politically?' They have a different vision of government than the previous administration did. They want a more activist government. That's what they ran on, that's what they were elected on.
"Many of us assume it is easier to cut spending, but that's clearly not the case," Tanaka added. "Otherwise we would have done a better job.
"Where do we go from here? We wish them luck," Tanaka said. "In fairness, they have not been in office that long. We hope they really take seriously their commitment to reinvent government and try to make it more cost-effective. And then we've got the second shoe, which is about to drop: health care reform. That's where we'll really see how serious they are."