By the third week of July, at its so-called "midyear budget review," the White House will unveil its new projected 10-year federal budget. Insiders tell me it's likely to show a surplus that's half a trillion dollars larger than the one now projected. Why? Because America's wealthiest 5 percent are becoming far richer, far faster than budget planners had predicted. Even with the aid of high-paid tax attorneys and planners, they're paying a lot more in income taxes and capital gains taxes than had been projected. The surplus is rising like yeasty dough.
The new dough presents leading Democrats--especially Al Gore--with something of a dilemma. So far, the Gore campaign's central message has been that George W. and his fellow Republicans are spendthrifts because they intend to use most of the surplus for a whopping $1.3 trillion tax cut, while Gore represents the very model of fiscal responsibility. He'd cut taxes only moderately, spend a modest portion of the surplus on education and health care, and use most of it to pay down the national debt until it vanished by 2013.
But if the revised surplus is so big that it can accommodate Bush's giant tax cut and also allow some modest spending and debt-cutting, Gore's "I'm fiscally responsible and he's not" message isn't nearly as persuasive. How will Gore be able to regain the high ground of fiscal conservatism? By insisting that the additional surplus be applied to eliminating the debt even earlier than 2013. That, at least, is the notion now being advanced by some members of the Gore team.
This absurdity is the logical consequence of the White House's paranoia about the political potency of a Republican tax cut, which started in 1998, when the federal budget miraculously came into balance several years ahead of schedule and then swiftly moved into surplus. Not only were Social Security payroll taxes far in excess of what was needed to pay current beneficiaries, but the stock market was surging and capital gains taxes were flooding the Treasury. How to stop Republicans from turning the surplus into a tax cut?
The White House's first ploy was to argue that Social Security had to be put on a sound financial footing before any Republican tax cut could be considered. "Save Social Security first" was a winning message because it suggested that any tax cut would jeopardize this most sacred of all hallowed programs. Republicans responded by upping the ante: If the White House were truly concerned about saving Social Security, then it should take off the surplus table every penny of Social Security payroll taxes in excess of what was needed to pay Social Security beneficiaries. The bluff was called and accepted, and the "budget surplus" immediately shrank.
But the money continued to roll in as America's wealthy got fabulously wealthier, with the result that the non-Social Security surplus grew. The White House needed a new strategy to block the Republican tax cut, so the president opted for a new goal that seemed even more fiscally responsible than saving Social Security. In his State of the Union address last January, he proclaimed that debt elimination was now the key to the nation's future. In tones redolent of Calvin Coolidge, Clinton urged America to meet the new challenge. "Let's make America debt free for the first time since 1835!"
The president's new budget sought to pay off the nation's entire $3.6 trillion debt by 2013. Why 2013 rather than 2030 or 2040? Because achieving the more ambitious goal would require that more than half the surplus--as it was projected last January--be used for debt reduction. The administration could say with a straight face that, in contrast to the wastrel Republicans who wanted to devote most of the surplus to a tax cut, it would use most of the surplus to eliminate the debt.
But by the second or third week of July, the White House will have to reveal its new estimate, showing last January's projected surplus superceded by a much bigger one. How to keep tarring George W. and the Republicans as profligates and touting Gore and the Democrats as fiscal conservatives? By advancing the magic year for debt elimination from 2013 to, say, 2010.
Here's a better idea. Commit to using the extra money for the nation's children. The scandal that neither Gore nor Bush wants to talk about is that almost 25 percent of the nation's children under age six are still living below the poverty level--defined for a family of three as about $13,000 a year. If you add children from families that are nearly poor, earning less than $22,000 a year, you're describing about 40 percent of America's young. This, despite the roaring nineties, despite the lowest level of unemployment in 30 years. And here's the kicker: Most of these poor and near-poor families include at least one working adult. The scandal, in other words, is that a significant portion of working Americans are still not earning enough to keep their children safely out of poverty.
Gore should stop obsessing about Bush's tax plan. Yes, it's nice to be able to characterize the Republican presidential aspirant as a spendthrift and describe oneself as a veritable scrooge, but the public is tiring of this. And yes, polls show that most Americans don't want a tax cut anyway, but they're not particularly enthused about eliminating the debt either.
Use the upcoming surplus to fashion a positive Democratic message designed to help America's kids. A half-trillion dollars won't solve all their problems, but it will go some way toward better education, child care, and health care. The next generation will benefit from these things far more than it will gain from eliminating the debt. And Gore will benefit by having a clear goal worthy of a Democrat. ¤