Bush, Kerry goals costly
September 24, 2004
WASHINGTON – President Bush and Democratic Sen. John Kerry have starkly different economic priorities with a common thread: price tags exceeding $1 trillion that could pump already huge deficits skyward over the next decade.
Headlining Bush’s budget goals for a second term is making permanent the tax cuts he has pushed through Congress, at a 10-year cost the administration sets at nearly $1 trillion. Leading Kerry’s agenda are his 10-year, $653 billion health care plan and a $207 billion education package.
Both candidates supported the five- and six-year extensions of $133 billion in middle-income tax cuts that Congress passed Thursday. Kerry wouldn’t have included the $13 billion in renewed business tax breaks that Congress attached to it but would have added bigger government child-support checks to working low-income families who do not pay income taxes.
Though he has offered no details, Bush also would let workers divert part of their Social Security taxes to new personal savings accounts – which some analysts estimate could cost $2 trillion over the period.
Kerry would raise the money for his priorities by repealing tax cuts on upper-income people, increasing government efficiency and prodding companies to improve workers’ health coverage. Some analysts say he has underpriced his health plan and proposed some savings that are wishful thinking.
“They are presenting very, very different agendas. But they arrive at roughly the same place relative to the deficit,” said Robert Bixby, executive director of the Concord Coalition, a bipartisan group that advocates balanced budgets.
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Bixby estimates both men’s initiatives would increase the government’s red ink by at least $1.2 trillion through 2014.
Bush and Kerry each assert they would cut the annual deficit in half within five years.
Kerry favors budget restrictions that go further than Bush, like requiring savings to pay for tax cuts, and has said he would trim his priorities if deficits worsen. That won praise from the investment bank Goldman, Sachs & Co., which wrote in a newsletter this month, “On the budget, Senator Kerry is more credible” than Bush.
Even so, each candidate’s deficit-reduction plan has been overshadowed by promises to cut taxes or boost spending.
“Voters like tax cuts, spending increases and deficit reduction. All three are incompatible, but vague promises make it look achievable,” said Brian Riedl, budget analyst with the conservative Heritage Foundation. “Neither party has offered a detailed or realistic plan.”
Kerry finds money for his proposals by starting with the assumption that the Bush tax cuts for all taxpayers will remain in effect permanently. They are scheduled to expire by 2010, though many lawmakers and analysts believe they will be renewed.
Kerry’s assumption lets him claim $860 billion in 10-year savings by repealing the tax cuts for families earning more than $200,000 annually. It also lets him claim no cost for another of his top initiatives: Extending the tax reductions for those making less than $200,000.
Leonard Burman of the liberal-leaning Tax Policy Center estimates that, measured against the assumption that all of those tax cuts will expire, the two Kerry proposals would cost $361 billion over 10 years.
Kerry’s health care package is the keystone of his economic plan, an amalgam of tax breaks and spending aimed at cutting insurance premiums and covering more of the uninsured. Joseph Antos, a health policy expert at the conservative American Enterprise Institute, estimates its true 10-year cost at $1.5 trillion, which the Kerry campaign denies.
Bush would steer the budget on a different course.
At his party’s national convention this month, he proposed doubling job-training funds and expanding health care tax breaks, a package his campaign prices at $74 billion over 10 years. He also touted his desire to let workers use some of their Social Security taxes to create personal savings accounts, without offering specifics.
Peter Orszag, an economist at the liberal Brookings Institution, said he believes such a plan could cost about $2 trillion over 10 years, including adjustments for inflation. He based that on one option studied by the commission Bush appointed in 2001 to study the program’s long-term solvency problems.
Tim Adams, the Bush campaign’s policy director, said a more reasonable estimate was less than $1 trillion, based on another option the commission examined. He defended Bush’s refusal to offer details.
“In an election year, putting a specific plan out becomes nothing more than a target for partisans to go after,” Adams said.
To push deficits downward, Bush relies on economic growth he says will result from tax cuts, and on unspecified cuts in future spending. But his budget makes no reference to future U.S. spending in Iraq, the costs of keeping the alternative minimum tax from hitting middle-income families, or details of which domestic programs he would restrain.
On the Net
Bush campaign: http://www.georgewbush.com
Kerry campaign: http://www.johnkerry.com