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Budget cost savings not realistic

Barack Obama pledges to extend health insurance coverage. John McCain plans another round of tax cuts.

But the latest budget projections make clear that whoever is elected president in November probably will spend his first year in office coping with a fiscal mess left by the Bush administration while also seeking to spur a lagging economy. That’s no easy task, but it seems inevitable, given the figures the White House issued this week. They predict the federal deficit will reach record levels next year, thanks to the economic slowdown and the fiscal failures of Congress and the administration.

None of this has stopped the presumptive nominees from pressing ahead with proposals that might exacerbate the situation – Obama with too much new spending, McCain with unaffordable tax cuts.

Indeed, each might be wise to temper public expectations about how much he can do, given the likelihood that the winner will inherit an even worse situation than President Bush’s economic advisers concede.

Their deficit figures retain the dishonest practice of recent years of failing to include the full cost of projected spending for wars in Iraq and Afghanistan. They also fail to provide for action beyond this year to offset the impact of the alternative minimum tax on middle class families, on the dubious assumption that the tax system will be reformed. And they use more optimistic growth and inflation forecasts than many economists.

Even without the soaring deficit, the next administration will face tough fiscal decisions. Besides coping with a weak economy, it will have to decide whether to seek extension of the massive tax cuts Mr. Bush pushed through Congress at the start of his first term.

The reason is a 2001 compromise that limited their duration to make them seem less expensive in the long term than if they had been permanent.

Bush has sought without success to extend the cuts. Democrats blocked him, contending too much of the benefit went to wealthier taxpayers.

McCain initially voted against the cuts for that reason. But in wooing Republican conservatives, he switched his stance. Now, he favors extending the cuts, plus giving upper-income taxpayers an added bonanza by eliminating the AMT.

But his main emphasis is on curbing spending, especially by eliminating the “earmarks” that enable lawmakers to designate funds for local projects. He vows to veto any bills with earmarks and says he can save $100 billion by eliminating them. According to the nonpartisan, most analysts estimate the actual saving at closer to $18 billion.

McCain says he’ll cut other wasteful spending but has not been specific. The truth is such efforts rarely produce anything close to their goals.

Obama also has made fiscally questionable proposals. For example, he says the widespread use of electronic records would pay much of the $120 billion cost of his health care plan. But says that’s based on a Rand study that specifies it will take a dozen years to save that much.

And Obama counts on phasing out Iraq spending more quickly than is likely, especially if he simultaneously steps up the military effort in Afghanistan.

Meanwhile, Congress has not passed any of the bills needed to fund the government after Oct. 1. And if Democratic leaders have their way, lawmakers will buck the issue to the next administration – which they expect to be Democratic – by extending last year’s spending levels until sometime next year.

That may be irresponsible, but it reflects political reality. True, the Bush administration has been able to reach compromises with Democratic leaders on such issues as electronic surveillance rules and the housing mortgage mess. But their taxing and spending priorities are sufficiently different that accords are unlikely, especially this close to an election.

Carl P. Leubsdorf is Washington bureau chief of the Dallas Morning News. His e-mail is


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