WASHINGTON – The new projected record federal budget deficit of $482 billion will severely limit the next president’s ability to cut taxes and pay for pet programs, yet Barack Obama and John McCain are offering few specific ways to deal with it.
“There’s a huge missing issue on the campaign trail,” said Robert Bixby, the executive director of the Concord Coalition, which advocates fiscal discipline.
The new president will take office four months into a fiscal year whose deficit is likely to shatter the record of $413 billion, set in 2004, the White House said Monday.
McCain has pledged to balance the budget by 2013, while Obama has no timeline. Both candidates pledge to keep most taxes low while revamping the nation’s health care system and strengthening its military.
Obama would raise taxes on the wealthy but leave many of President Bush’s 2001 and 2003 tax cuts in place – reductions that will cost the government about $2.8 trillion in the next decade, according to last week’s report from the Urban Institute-Brookings Institution Tax Policy Center, a joint project of the two center-left research centers.
McCain would maintain more of the tax cuts, at a price of about $4.2 trillion. His chief strategy for deficit reduction is to end earmarks, or congressionally mandated local projects, and to eliminate waste, fraud and abuse from federal spending.
The White House said such “earmarks” cost $16.9 billion last year, out of a $2.93 trillion federal budget – about half of 1 percent of federal spending.
“Obama has a variety of costly proposals, but McCain has a variety of proposals that are even more costly,” said Richard Kogan, senior fellow at the Center on Budget and Policy Priorities, a liberal budget-research group.
Republican-leaning analysts also saw few specifics about deficit reduction in the candidates’ plans.
“I don’t see us getting into balance anytime, until we tackle Social Security, Medicare and Medicaid,” said Brian Riedl, budget analyst at Washington’s Heritage Foundation, a conservative research group.
Medicare is expected to run out of money by 2019 and Social Security’s trust fund should be depleted by 2041, according to the programs’ trustees. Bush has tried to limit the growth of Medicaid, the federal-state health care program for lower-income residents, but Congress is still debating that.
Obama would increase Social Security taxes on wealthier taxpayers – the tax now applies only to earnings up to $102,000 – saying that new taxes are the “first place to look for ways to strengthen” the system. He also vows to reduce waste in Medicare and “tackle fundamental health care reform” to make it more efficient.
McCain is similarly vague, saying he wants to “modernize” the three systems but offering no details. This past weekend he said of Social Security, “everything is on the table.”
The McCain and Obama camps reacted to the worsening deficit news Monday by reiterating that their programs would trim the deficit, but specifics remained few.
Obama met with a team of top Democratic economic advisers, including former Federal Reserve Board Chairman Paul Volcker, Clinton administration Council of Economic Advisers Chairman Laura D’Andrea Tyson and five Clinton Cabinet members.
Also present were two Bush appointees, former Treasury Secretary Paul O’Neill and former Securities and Exchange Commission Chairman William Donaldson.
Financial experts are wary of Obama’s spending plans. “The big question mark is health care,” Bixby said.
After the meeting, former Sen. Bill Bradley, D-N.J., and Tyson wouldn’t get specific about Obama’s plans for deficit reduction. He calls for a new $50 billion economic stimulus plan, then a longer-term deficit reduction.
McCain’s campaign advisers briefed reporters by phone, saying that cutting taxes would induce consumers to spend and employers to create jobs and that revenue would flow into the Treasury. However, a host of economic studies, including by the Bush Treasury Department, conclude that tax cuts drive up federal budget deficits even if they stimulate the economy, unless they’re matched by spending reductions.