CAMBRIDGE, MASS. -- One party claims that the budget surplus will be small and that a central goal should be to eliminate the debt. The other says the surplus will be big and we can do ambitious things with it.
You'd be forgiven if you thought that the first party was the Republicans and the second the Democrats. But it is the reverse. The Democrats are marching under the banner of fiscal austerity, and the Republicans are proclaiming this the era of large ambition.
"Here's the facts," said George W. Bush the other day, pointing to the latest estimate from the Congressional Budget Office as showing that the nation could well afford his plan to trim income taxes by $1.3 trillion over 10 years and still have enough money to fund social programs.
But President Clinton, in his new budget, claims the surplus that's left over after saving all Social Security receipts is a little more than half that -- $746 billion. The president's estimate is even smaller than the most conservative projection coming out of the Congressional Budget Office, which foresees a 10-year non-Social Security surplus of $838 billion to $1.9 trillion.
The administration's budget also makes retiring the debt the nation's biggest financial priority, aside from saving Social Security. "Let's make America debt-free for the first time since 1835!" the president exulted in his State of the Union Message. His new budget seeks to pay off the entire $3.6 trillion tab by 2013.
Granted, the new budget also provides a buffet of attractive policy ideas, few of which will be enacted by this Republican Congress in this election year. Debt elimination trumps all of them.
Meanwhile, Vice President Al Gore is blasting both Bush and Bill Bradley for counting on large surpluses -- Bush to finance a tax cut and Bradley for spending. Gore says he'll pursue debt reduction even if the economy slows, "just as a corporation has to cut expenses if revenues fall off," adding that a recession should be viewed as an opportunity to push cuts further "before any other options are considered."
Even House Democratic Leader Dick Gephardt is sounding a bit like Calvin Coolidge these days, saying that "until the money is in the Treasury" Congress shouldn't make new promises and "if and when it materializes" we should use the surplus for Social Security and Medicare.
And what of the non-Social Security surplus that Republicans are drooling over? Use that for "paying down the debt and honoring our existing commitments to health and education," he said. But those existing commitments aren't much to write home about.
It would be one thing if the born-again, fiscally austere Democrats were speaking out of strong conviction backed by sound ideas. But the conviction is paper-thin. Eliminating the national debt has not been a plank of any Democratic economic program in living memory, and most Democrats who are now talking gravely about its importance have never uttered the words "eliminate the debt" before.
Besides, eliminating the debt shouldn't be the nation's goal. As long as the debt doesn't rise as a proportion of national product (and by that measure it's been falling now for several years), the important issue isn't how large it is in absolute dollars but what the borrowed money is used for. Borrow to give all our nation's kids good schools and healthy bodies, and that's a smart investment -- no less important to America's future prosperity than any private-sector machinery or real estate made slightly cheaper because interest rates were driven lower by debt repayment.
So why are Democrats sounding like Coolidge Republicans? Despite polls showing dwindling interest in tax cuts, the Democrats remain spooked by the possibility that voters will be attracted to ambitious Republican tax-cutting plans in the fall, and they haven't the confidence to build public support for an equally ambitious program centered on education and health care.
When the surpluses first began ballooning, the president dealt a body blow to Republican tax cutters by telling the public the choice was between cutting taxes or saving Social Security. But last year, as the surpluses continued to mount, the Republicans handed the president a $792 billion, 10-year tax cut that wouldn't touch Social Security revenues.
The president vetoed that plan, but the die was cast. The White House felt it had no alternative but to play the debt card if the tax cutters were to be stopped in this election year. The rest of the Democratic establishment is falling into line.
The Democrats are wrong on three counts. First, the public isn't nearly as eager for a tax cut as Democrats fear. During the 1990s, incomes soared only at the top rungs of the ladder, so that most tax revenues are now coming from the well-off.
Over 30 percent of income tax revenues are now collected from the top 1 percent of earners, 60 percent from the top 10 percent. Every Republican tax-cutting plan gives most of the money back to the people from whence this money came, leaving peanuts for most other Americans -- and the voters know it.
Second, it's plain dangerous to make the elimination of the national debt a core goal of policy. It is dumb on economic grounds ("He should wash his mouth out with soap," Nobel laureate economist Robert Solow was quoted in the New York Times as saying of Gore's plan to continue to pay down the debt even when the economy slows). But it also puts the Democrats in a straitjacket when it comes to any future proposal for universal health care or universally good schools.
Which brings us to the third problem for the Democrats. "Eliminate the debt!" is not the sort of cry likely to rally many loyal Democrats to vote next November, or even to ignite many of the passions of independents.
If the Democrats stand for anything, it should be for helping the little guy who's gotten relatively little out of this buoyant economy so far. Not incidentally, little guys include most voting-age Americans. Little guys could get passionate about good health care and good schools.
But faced with a choice between tax cuts for the big guys or fiscal austerity, the little guys may well decide to stay home.
-- Robert B. Reich, former secretary of labor, is professor of social and economic policy at Brandeis University.
© Copyright 2000 Star Tribune.