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Subject: Do What to the
Date: Tue, 17 Nov 92 04:36:11 EST
Message-ID: <10.1992Nov17.043611@AmeriCast.com>

Do What to the Deficit?=

 PRESIDENT-ELECT Clinton agrees that the deficit needs to be re-
duced, but says that right now the economy is too weak to stand
the strain. The necessary tax increases and spending cuts, by re-
tarding growth, would be counterproductive and possibly increase
the deficit, he remarked again yesterday in a news conference
with his party's congressional leaders. The cure that he prefers
in the short run is stimulus.

Mr. Clinton also seemed to revive yesterday the bad idea of a
middle-class tax cut "if we can work it out." He had joined
congressional Democrats in urging such a step during last
spring's primary season, then had begun to soft-pedal it partly
because of the cost. But yesterday he returned to it on fairness
grounds, agreeing with advocates that the combination of income
tax cuts and Social Security tax increases in recent years had
left the tax system regressive. He argued as well that a middle-
class tax cut, too, would be a step toward deficit reduction in
that the public would be much more willing to "contribute over
the long run if they believe we're starting from a fair tax sys-
tem." The governor also suggested that a serious effort to reduce
the deficit would have to await a plan for controlling health
care costs, since those are the great engines on the spending
side of the budget and it does no good to try to cut Medicare and
Medicaid costs without doing so for medical care costs generally.
Elsewhere, however, he has said that he will need the proceeds of
cutting health care costs to pay for increasing access to care on
the part of the uninsured.

Mr. Clinton made no secret during the campaign that deficit
reduction would not be an early goal. The deficit is already ex-
pected to decline to about a quarter of a trillion dollars over
the next several years as the economy modestly recovers and the
cost of the savings and loan bailout recedes; then it will likely
start back up again. The governor basically took a Hippocratic
oath that, while attacking other problems first, he would make
the deficit no worse - and later would try to make it better.

 But later is when everyone wants to reduce the deficit. Recent
presidents-elect (including Jimmy Carter) have all said they
could balance the budget through stimulus rather than restraint,
and it hasn't happened. Interest costs are now about a seventh of
the budget and consume about a fourth of all tax revenues; the
higher the debt, the less the government has left to spend on
governing.  Everyone understands that the time for taking painful
steps is early in a presidential term, when the president is
likely to be strongest and there is plenty of opportunity for the
wounds to heal - not late, when the next election is approaching.

If Gov. Clinton decides he needs to stimulate the economy, the
short-term stimulus needs to be accompanied by longer-term res-
traint - and the restraint needs to be legislated, not just prom-
ised: Title II of the same bill. It's not to propitiate the bond
markets that the Democrats who now control the country mainly
need to do this; it's to make sure that in the future they have
the money to carry out their own good social agenda. The Republi-
cans who attacked the Democrats for tax-and-spend adopted a poli-
cy of borrow-and-spend and beggar-thy-government instead. The
Democrats have to do better.02:08 11-17C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

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