Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, June 1, 1995 TAG: 9506010048
SECTION: EDITORIAL PAGE: A-9 EDITION: METRO
SOURCE: RAY L. GARLAND
DATELINE: LENGTH: Long
Had the president been willing to take the heat on Social Security and Medicare, he might have gained some Republican votes for raising taxes on top earners, which had been a staple of his campaign rhetoric.
Clinton chose instead to govern in the mold of Lyndon Johnson's Great Society. The difference was LBJ had a landslide at his back. Clinton's unwillingness to seize the moment helped produce the first Republican Congress in 40 years.
While many reasons for the GOP victory could be given, the one making the most sense is that voters sympathetic to issues raised by Ross Perot in 1992 concluded Democrats had no real intention of controlling the deficit, except by raising taxes, and voted Republican in droves.
In fact, the deficit has been reduced by a third since 1992-93. But most of that came from tax increases put through in Clinton's first year and a recovering economy. It has also been held down by selling savings-and-loan assets instead of having to buy them, and by shortening the term of Treasury obligations. That portion of our $4.8 trillion national debt now financed in notes and bills maturing in less than five years stands at an all-time high of 74 percent.
The decision to shorten maturities to save on interest payments has been vindicated by events. But it does expose the country to a ballooning of the deficit should rates rise.
The president decided to ignore the voters' mandate of last November and proposed more of the same old thing. For the coming fiscal year, he projected a deficit of $197 billion. More remarkable is the fact he projected deficits as far as the eye could see: $1 trillion more debt over the next five years.
House Republicans ignored the president's budget and passed a bill prescribing a balanced budget in seven years. In order to provide a $500 credit against taxes due for all children under 18, and cut some other taxes, outlays in 2002 would be only $200 billion more than now.
But spending on Medicare would grow by 44 percent; Social Security by 41 percent; Medicaid by 29 percent; veterans' benefits by 11 percent and defense by 4 percent. Everything else would have less money in 2002 than now. In the Virginia delegation, the vote on this budget split along party lines - all Republicans for, all Democrats against.
The big issue in the Senate was whether to include a tax cut. One of the old deficit hawks from the '80s, Sen. Pete Domenici of New Mexico, back as Budget Committee chairman, insisted the proper course was balance the budget first and then cut taxes. He was supported in this view by virtually all Democrats and some Republicans, including Sen. John Warner.
By leaving tax cuts off the table, the Domenici plan projected spending $2.1 trillion in 2002 under a balanced budget, or nearly $300 billion more than the House wanted. On final passage, even this rather generous blueprint won the support of only three Democrats. Let the record show that Sen. Charles Robb was one of them.
The president's low standing was shown when the Republican leader gave the Senate a chance to vote on the Clinton budget as submitted. It was rejected 99-0!
Democratic Rep. L. F. Payne of Virginia's 5th District defended his vote against the GOP budget by saying the cut in taxes "simply keeps us in the deficit ditch with our wheels spinning." He might reflect on his own votes in 1991 and 1993 to raise taxes and ask himself if they weren't designed to get us out of the deficit ditch.
Cutting taxes in the face of such deficits is hard to justify. But all our recent experience suggests federal spending is restrained only by tax cuts and the fear of running deficits larger than capital markets will happily absorb.
Now, the great differences between the House and Senate will have to be composed in conference. Clinton will then face a defining moment of his presidency: Accept the congressional budget or go to the people as the defender of the idea that with so many worthy causes to be funded, deficits don't really matter. He will almost certainly take the second course, and probably has no other choice if he seriously desires re-election.
Well, does the deficit matter? In the here and now, not very much. You can even make an argument that some deficit financing serves a useful purpose.
But that $6 trillion debt at the end of fiscal 2000 contemplated in Clinton's plan does pose a danger if its rosy scenario of low inflation, low unemployment and low interest rates comes unglued. Change these by very much in the wrong direction and you quickly get deficits in the range of $400 billion. How world capital markets would react isn't clear. But it's a risk we have no right to run.
The fly in the ointment is that in order to preserve middle-class entitlements more or less intact, and pay the interest on the national debt, there must be a withering of the operational functions of the national government.
That this is hardly the end of the story (or the end of the world as liberals know it) might be observed in the fact this marks the third deficit-elimination scheme of which Sen. Domenici has been a leading advocate.
Ray L. Garland is a Roanoke Times & World-News columnist.
by CNB