THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, August 9, 1996 TAG: 9608090015
SECTION: FRONT PAGE: A17 EDITION: FINAL
TYPE: Opinion
SOURCE: Keith Monroe
LENGTH: 82 lines
During Bill Clinton's campaign speeches in 1992, young Republicans sailed frozen waffles at him like frisbees. This was meant to be an ironic comment on his propensity for waffling on the issues.
Now that austere, Midwestern, deficit-hawk Bob Dole has become a supply-sider, young Democrats - if any - may start punctuating his speeches with the flipping of pancakes the size of Kansas. Dole has performed a huge flip flop.
Though Dole claims he can balance the budget and cut taxes $550 billion, there's reason for doubt. Yet Dole may be in touch with the public mood. Deficit cutting is painful. There seems to be a growing feeling that an annual deficit of $117 billion is no big deal.
There's an easy answer for that. Just wait, it'll get bigger. Admittedly, a $100 billion deficit is better than the $200 billion deficits that were the norm during the Bush presidency. But it still isn't zero and won't be until 2002. And that assumes the economy cooperates and Congress and the president continue to pursue a balanced budget.
Since the deficit has shrunk dramatically, a false sense of security may be abroad in the land. The deficit is 1.6 percent of GDP, the lowest level since 1979 and a smaller percentage of the national economy than the deficit in Germany, Japan or any industrialized country with the exception of Norway.
It's an accomplishment Democrats and Republicans - with prodding from Ross Perot and anti-deficit groups like the Concord Coalition - should be proud of. The Republican revolutionaries in the House claim credit for eliminating 270 programs, agencies and offices. There have also been cuts in many activities unpopular with the right. Public Broadcasting lost 5 percent of its funding, the National Endowment for the Arts is down 38 percent, Legal Services for the poor lost 33 percent, HUD is getting 10 percent less. . . .
According to the conservative Heritage Foundation, all that cutting took $16 billion out of the 1995 budget and will remove $23 billion from 1996 spending. Still, that's not much in a $1.6 trillion budget.
A lot more reduction has come as a result of the end of the Cold War. Defense spending accounted for 22 percent of the budget in 1992. It's down to 17 percent. The federal work force is at its lowest level since Kennedy was president; since 1994, 112,000 jobs have been cut, 61,000 of them from defense.
The Senate Budget Committee claims that 75 percent of the credit for deficit reduction should go to GOP cuts in appropriations. But the deficit reduction package President Clinton championed also levied higher taxes on upper bracket Americans. Clinton's been attacked for that, but the deficit wouldn't be as low as it is without the added revenues.
Tax receipts are 33 percent higher today than in 1992, partly due to the Clinton package and partly to a robust economy. The revenue was needed to offset increased entitlement spending. This year, Medicaid will cost 37 percent more than in 1992. Medicare will cost 51 percent more than in 1992. Yet that's progress. Between 1988 and 1992, the Medicaid bill grew by 122 percent.
At the moment, the stars are all in alignment. Low interest rates are keeping payments on the national debt under control. If we hadn't added $1 trillion to the national debt every four years, starting in 1980, we'd now be running a budget surplus of $130 billion. Instead, debt service will cost the nation $240 billion this year. If interest rates were to rise, the deficit would explode.
Low unemployment is also a help. We are paying 36 percent less in unemployment compensation than in 1992, when a recession was ending. To a large extent, the benign economic environment is due to confidence by financial markets and the Federal Reserve that the deficit is being fought.
Many economists believe the Dole tax cuts would make a balanced budget impossible since he's also promised not to cut entitlement. And some in the GOP advocate increased defense spending. If the bond market believes the fight against the deficit is over, it could be expected to render an expensive vote of no confidence. Interest rates would rise.
The biggest budget worry is entitlements as the huge baby-boomer generation approaches retirement. Susan Tanaka of the Committee for a Responsible Federal Budget is quoted by The Wall Street Journal: ``the long-term problem is being driven by the costs of programs that serve the elderly. And nothing has been done about those.''
Neither presidential candidate is advocating the steps needed to reform entitlements: trimming automatic cost-of-living adjustments, means-testing benefits, raising the age of eligibility and increasing deductibles. Instead, the flip flopper is promising to cut taxes a lot. The waffler is promising to cut taxes a little. We aren't in Kansas any more, Toto. MEMO: Mr. Monroe is editor of the editorial page of The Virginian-Pilot. by CNB