September 7, 2000
Examining Al Gore's and George W. Bush's proposals on how to use the budget surplus.
WARNER: To debate the merits of these plans, we turn to economic policy
advisors to both campaigns and to two interested outsiders. The Gore
campaign's Laura Tyson is dean of the Haas School of Business at the
University of California Berkeley. She served as President Clinton's
national economic advisor. The Bush campaign's Martin Anderson is a
fellow at the Hoover Institution. He was a top economic advisor in the
Reagan administration. For outside perspective, we turn to Robert Kuttner,
an economics writer and coeditor of the American Prospect, a
biweekly magazine; and Stephen Moore, a senior fellow at the Cato Institute.
|How to spend the surplus|
LAURA TYSON: I think the most essential difference is of that projected non-Social Security surplus-- about $2.2 trillion, by reasonably conservative estimates-- the -Vice President Gore has proposed a very balanced approach. He has proposed to devote some of that to tax cuts, very targeted to specific objectives that Americans are concerned about like savings and healthcare -- and also targeted so that working families, middle income families achieve the bulk of the tax relief. But he has also said, look we have to make a firm commitment to reducing the debt. We need to eliminate the debt by 2012. So a substantial fraction of this projected surplus should not be spent; it should essentially be devoted to debt reduction. And then, finally, let's face it: There are priorities the American people have for their government, priorities like a prescription drug program for Medicare, additional spending on education, expanding health insurance to young children-- and those kinds of priorities, the American people want to see their government help them address those problems. So it's a balanced approach within a fiscally sound overall plan. Their plan does not overspend the $2.2 trillion. As a matter of fact, about $700 billion of that $2.2 trillion is targeted for debt reduction.
MARGARET WARNER: All right, Martin Anderson, I imagine you see this differently.
MARTIN ANDERSON: Well, actually, Governor Bush has a balanced approach very... in the same way that Laura was talking about it, balanced differently, though. Let me first of all talk about the essence of the tax package. First of all, it fits. We've been very careful about that. Dozens of the nation's finest economists have made sure the numbers fit. Second, in terms of the tax cut, every single working American gets this tax cut; there are no exceptions. But the interesting thing about Governor Bush's plan that hasn't received a lot of attention is the way that tax cut works. He wanted to focus on low-income people who are just starting to climb the economic ladder. So let's take a typical family-- a mother, father, and two kids. Their income is between $25,000 and $30,000 a year, they get a 100 percent cut in their income taxes. If their income is between $35,000 and $50,000, the tax cut declines from 100 percent down to 50 percent. But it's still 50 percent if you make $50,000. Going up another $25,000 in the middle-income group, the tax cut drops from 50 percent down to 25 percent. The essence of the Bush tax cut plan, it's focused on the low and middle-income people. And the lower your taxable income, the higher the percent of the tax cut you get. Now that is what this campaign is all about, is what kind of a tax cut. And I think I'd love to see an example. I think we should compare both tax cuts. George Bush has gone a long way to this with his Web site. You can go on the Web site-George W. Bush.com-- and you can type in the bottom right-hand corner, a little thing called a tax calculator. And every single American can go on that site and find out exactly what they're now paying in income taxes and what they would pay if George W. Bush got elected. And I would like to see Al Gore do the same thing. I think it would be a fascinating comparison.
MARGARET WARNER: All right. Laura Tyson, going back to you, both campaigns on the ads and on the campaign trail are making the assertion that his plan is better for working middle class families. Now, you just heard Marty Anderson say, essentially, the tax cut is what they want and what they need. What's your counter-argument as to why Gore's plan is better for this group of families? And I don't mean just the tax cut, I mean the whole way of using the surplus.
LAURA TYSON: Right. Well, I think it's important. I need to say one thing about the tax cut, and then I will go on. If people do go to the Bush Web site and do the tax calculator, I suggest that they pretend that they have an income of $100,000 or $200,000 or $1 million, or $5 million, and then compare the size of the dollars that will be given back to the high-income families versus the size of the dollars to the middle- and low-income families. These numbers are well known. For the top 20 percent, we are seeing 60 percent of the dollars directed to that class from the tax cut. We're only seeing less than 10 percent, or about 10 percent, of the total dollars of the tax cut going to the bottom 60 percent. If a middle class person thinks a $400-a-year tax cut is good for them, they should recognize that, in order to get that tax cut, they are giving up a substantial part of the surplus so that those at the top end might get something like a $50,000 tax cut, or a $5,000 tax cut. So that's the first ploy. Play with the tax calculator, by all means, and then you will find out that the bulk of the money goes to the upper income group. Now, that's a different way of using the money. Upper-income people have done very well during the current economic expansion. And middle-income people have begun to share in that. But middle-income people have a lot of burdens. They're not saving enough for their retirement. They have trouble paying education bills. They have trouble taking care of their loved ones, who are old and need long-term care. They have trouble insuring their children. All of those needs are needs which the tax proposals, and spending proposals, of the Gore plan address. And they are left un-addressed by the Bush plan.
MARGARET WARNER: All right. And Marty Anderson...
MARTIN ANDERSON: Can I answer that?
MARGARET WARNER: Yes, but let's try not to get too much into the numbers of the tax cut, and tell us in more philosophical terms why Governor Bush doesn't see it as Al Gore does, that these other programs will be more helpful to working class families, whether it's subsidies for day care or whatever it is.
MARTIN ANDERSON: Because I think George W. Bush probably has a different definition of what "fair" is. The way Laura talks, if someone's making a large amount of money, like Bill Gates, and you give him a little, teeny percentage tax cut, that's terribly unfair. What George Bush says, the same thing that Ronald Reagan said, and the same thing that other people have said in the past-- John F. Kennedy did the same thing back in the 60's-- a fair tax cut is everybody gets a cut. The fact that you're making a lot of money may mean you shouldn't get a larger cut, but you should get a cut. Now, what the Gore campaign seems to be saying is that we are going to target this cut. The question I would like to ask is, okay, who gets the tax cut? I have never seen an analysis of anyone who's been able to decipher what Al Gore is saying that tells who gets it. It looks like a speckled tax cut to me.
MARGARET WARNER: All right, let -
MARTIN ANDERSON: And there's a difference in philosophy.
MARGARET WARNER: -- me bring in our outside voices at this point. Bob Kuttner, what do you see as the most essential difference between these two plans, in terms of how they would use the surplus, in broad terms?
|Searching for fiscal responsibility|
ROBERT KUTTNER: Yeah, I think there are two essential differences. The interesting thing here is that not only are the Democrats proposing the traditional idea that middle-class people need more of the benefits, in the form of social investment as well as targeted tax cuts, but the Democrats have also seized the mantle of fiscal responsibility. Republicans used to pillory Democrats with the idea that they tax and spend, they don't care about the solvency of the republic. I think Gore, rather astutely, is outflanking Bush in both directions. He's giving targeted tax cuts, he's also spending money socially for things like healthcare, but he's also outflanking Bush on the issue of who's more fiscally prudent.
MARGARET WARNER: Stephen Moore, that raises... Or that reminds me of a quote that was in the New York Times -- in the Wall Street Journal today, which said in fact, "Gore figures the best way for economic prosperity is to keep the bond market happy, and Bush figures the best way is to put more money in the stock market." Is there something to that, that they've almost reversed roles here?
STEPHEN MOORE: Well, you know, it's interesting...
MARGARET WARNER: No, no, this is for Stephen Moore.
STEPHEN MOORE: If you look at the Gore plan, it's hard for me to believe just five years ago that Bill Clinton said "the year of big government is over," because as I look at the spending proposals, he talks about, "we're going to reserve this surplus, we're going to stash it away," but if you look at the list of programs that he's talking about, this is the return of the era of big government with vengeance. I looked at some of the programs, Medicare expansions, drug benefits, child care programs, increased budgets for regulatory agencies, environmental programs, doubling the budget for the Education Department. These are huge expansions, and I think if Bush is going to win this election, he has to say, "no, this is not a fiscally conservative agenda that Al Gore is laying out. This is the nanny state," the kind of old McGovern, Mondale type liberalism that voters have not been... have not found appealing in the past.
MARGARET WARNER: Bob Kuttner, do you see this as just the old tax cuts versus spending, or something else?
ROBERT KUTTNER: Well, I think the nice thing about an economy that's growing at 4 percent a year, 5 percent a year, it's that you can have your cake and eat it, too. You can have a balanced budget, but you can also have some money left over for social spending. And I think the thing about Gore's approach is that the spending is targeted. It's targeted, not just scattershot, but to things that most people seem to want, like a Medicare drug benefit, or health insurance for children, and these things are costly. Drugs are expensive. That's why people are no longer able to pay for prescription drugs out of pocket, and why most Americans seem to want a prescription drug benefit under Medicare. So, in a sense, it's using government for things that the private sector doesn't seem to be able to provide by itself, like an affordable prescription drug benefit.
STEPHEN MOORE: You know, what's dangerous about this, though, is these are all new... I call them "fiscal time bombs" that Al Gore wants to put in the budget. They start with small budgets, but they get bigger and bigger as time goes by. We've been talking about the surplus today, and this is a year of surplus politics, but guess what? In ten to twelve years, we move out of surpluses as the baby boomers retire, then we're back in an era of deficits. Do we really want to set these time bombs in the budget that are going to explode just as the baby boomers retire, all these new, expensive entitlement programs?
MARGARET WARNER: Let me get Laura Tyson... Sorry, let me get Laura Tyson and Marty Anderson back in this. All right, both of you address this question. What if, "a," the surpluses don't materialize, or "b," as Stephen Moore suggests, they're out there for about ten years, but then they start to turn the corner? Which is a more fiscally sound or safe plan, or flip it around; which one puts us more potentially in the hole if these projections aren't right?
LAURA TYSON: Well, I would say the first thing is, one of the proposals that the Vice President has come out with this week in his very detailed budget, which I would suggest that people take a look at, is that there is a reserve built in. We don't know how large the surpluses will actually be, so why not take the most conservative numbers? Actually, they're more conservative than the numbers we've been dealing with, and say, you know, we're not going to spend everything we see out there. We're actually going to, if we do as well as we think, we're going to put an extra $300 billion into debt reduction. So the first thing is, there's a reserve. The second thing is, I think there is a real difference between setting out a set of spending priorities, and setting in motion a tax cut which is very back-loaded, so that, essentially, the tax cut begins to explode towards the end of the next decade, exactly when the baby-boom generation is beginning to retire in significant numbers. That is what the Bush tax cut does. When you say you're going to spend, you're going to spend on education, you're going to spend on prescription drugs, you're going to spend on health insurance for children, in fact those things end up being put in a process, a budgetary process, many of which are annual, or every-other-year processes. So you can look and see, well, what do the numbers really look like, and do we have to make adjustments because of the numbers? Once you have that tax cut written into law, those tax cuts are very hard to reverse. So I would suggest that's another way in which the Gore plan is much sounder. I would finally say that I would like to see in these...
MARGARET WARNER: Let me stop right there, just get to Marty Anderson, just on that point, in terms of which is more... Which is fiscally safer, if these projections aren't right?
MARTIN ANDERSON: That was one of the key issues that George Bush confronted when he developed his tax plan. And all the advice, and he agreed with it, was that the best way to ensure a continued prosperity is to have a reduction... marginal tax break. Nothing better for the economy -- it was proven by Jack Kennedy, it was proven by Ronald Reagan. Let me say one word about this fiscal responsibility business. I like the words that Al Gore is using, but when you look at his numbers, I don't think they check out. But don't take my word for it. We need some independent experts to look at these numbers, and if you look at what the Senate Budget Committee has just done, they say that Al Gore's numbers are as much as $900 billion in deficit. In today's New York Times ad, I don't know if you've seen that ad, Laura, but it's a massively dishonest ad. I can't believe Al Gore had read the ad. I mean, look, the ad claims that George W. Bush is going to spend $400 billion in missile defense. Where did they get that number? Did they make it up?
LAURA TYSON: Can I suggest the following? This is what I would suggest. This week, the Gore-Lieberman campaign put out a 12-chapter, 200-plus page document, in which they go through both the rationale and the details of every single one of their policy proposals with numbers. I think the best way to resolve this kind of debate is to have the Bush campaign do the same. Then we can sit down and we can actually do that.
MARTIN ANDERSON: There's a 457-page book that they put out last week.
LAURA TYSON: Fine. Good. Well, then, tell me what number... I would be willing to listen to what number you suggest is the cost of missile defense. What number is the cost of missile defense?
|Seeking the sounder plan|
MARGARET WARNER: Can I interrupt just the two of you, and let's just give Bob Kuttner, and Steve Moore back on this point about the fiscal responsibility? And Bob Kuttner, you first raised it. Which plan do you think is safer that doesn't pan out?
ROBERT KUTTNER: We heard Stephen Moore say that we're going to have a time bomb in 12 years, but if you look at what Gore is proposing, in 12 years, there's going to be no national debt, for the first time in the history of the republic. So I think if you do that, there's a lot of wiggle room for an economic downturn, for baby boomers to retire. I think it's really astonishing that we've reached a point, and I've been actually critical of the Vice President for almost overdoing the fiscal responsibility, for being too prudent, as it were. And I think you can make a case as a liberal that you don't have to pay the national debt down so fast. So I think it's remarkable that he's paying down the national debt, and I think he deserves a lot of credit for moving beyond this old stereotype of Democrats as fiscally irresponsible.
MARGARET WARNER: Stephen Moore?
STEPHEN MOORE: Well, I think to think that Al Gore as being too fiscally responsible is like thinking the Pope is not Catholic enough. But, look, if you look at how this expansion began, it began in the early 80's with the Reagan tax cut, and I think the lesson we've learned over the last 15 years is, the reason we've got these surpluses today, we grew out of the budget deficit. We really did. We've got... the revenues are coming in right now, and the key to keeping this budget in surplus is to keep the expansion going. I happen to believe tax cuts in a way that promotes saving and investment is the best way to keep this going.
ROBERT KUTTNER: Well, this boom started when they passed tax increases and some spending cuts...
STEPHEN MOORE: This is an 18-year expansion, Bob.
ROBERT KUTTNER: Well...
MARGARET WARNER: Gentlemen, I'm afraid we're going to... We're going to have to leave the historical argument there, and the whole argument there, but thank you all four very much.