Look Beyond Seven Years
STEP outside the US for a moment. Look back at America's president and his congressional opponents battling over balancing the budget. What do you see?
* Much gnashing of teeth about the difficulty of tightening the national belt in just seven years. (Remember, OECD economists hoped the US would seek to balance in three years.)
* Backloading of both the Republicans' relatively tough plan and President Clinton's looser one, so that the most-painful cuts in programs come in the final three of the seven years. That's conveniently on someone else's watch.
* Optimistic projections of economic growth rates, giving each side higher tax revenues to help shrink deficits. (That's Congressional Budget Office figures, not the rosier projections Mr. Clinton had wanted to use.)
* Almost no attention to the great void beyond seven years. That's when the nation approaches the retirement of the baby-boom generation into eligibility for Social Security and Medicare (not to mention more applicants for Medicaid). The post-World War II population bulge then begins to collect - and stops paying taxes for - federal retirement benefits.
Bottom line: The American public may be emotionally right but economically wrong when, as polls tell us, a majority feel the GOP House freshmen are ''going too far, too fast in the right direction.'' There's every reason to start dealing realistically with these challenges now rather than later when program cuts, taxes, or both would have to be much larger.
Don't despair. Compared with the Depression, World War II, or the cold war, this problem is relatively fixable.
It is, in fact, the opposite of a vicious circle. If hard decisions are made and stuck to, the shrinking of deficits as a percentage of GNP will cut the portion of Uncle Sam's budget going to interest payments on the national debt. It will also allow the Federal Reserve to take its foot off the brake (ease interest rates) for a longer period of time. This would stimulate growth in the private sector more than offsetting cuts in government spending. And faster growth in the private sector means more tax revenues.
Economy wonk Clinton knows this cold. But canny politician Clinton has seen a clearer path to reelection in letting the other guys be Scrooge. Now, with his poll numbers declining after their recent rise (and Bob Dole's rising), he appears to be rethinking his unwillingness to compromise more than a smidge.
If so, the White House is going to have to agree to slowing the growth of Medicare and Medicaid costs. And, if it wants to rescue funds for the environment, educational incentives, and research - as it should - it must give elsewhere. Bigger cuts in farm subsidies and in wasteful departments like Commerce and Energy would help.
GOP negotiators have shrunk their proposed tax cuts. Now it's the White House's move. The benefits of a counter-vicious-circle effect should provide incentive. To paraphrase Clinton strategist James Carville: ''It's the nation's future, stupid.''
To paraphrase Clinton strategist James Carville: 'It's the nation's future, stupid.'