What's The Difference?

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Some of the sharpest debate involves numbers crunching; each side implies the other is fudging its figures. The Gore campaign has long contended its champion would pay off much more debt than Bush would, and the Vice President himself now pledges to wipe out the entire $3.4 trillion federal debt owed to the public by 2012. Bushies contend Gore's figures don't add up and insist that their man also would pay off a great deal of debt--maybe as much as Gore.

There is no doubt, though, that as a stated priority debt reduction looms larger for Gore, who is trying to paint himself as a kind of fiscally conservative populist. Alan Blinder, a visiting fellow at the Brookings Institution and former vice chairman of the Federal Reserve Board, is emphatic about the thinking behind the Gore program he helped to shape. The obvious starting point "if you have just come off the most successful eight years of economic policy in history," says Blinder, is to "figure out what you were doing right and keep on doing it." To Gore, he says, that means above all continuing and accelerating the swing from piling up debt to reducing it. Accordingly, says Blinder, Gore expects to use about two-thirds of future surpluses--the whole Social Security surplus and part of the non-Social Security surplus as well--for that purpose.

Next, asserts Blinder, "a vast swath of the American populace," maybe half, "hasn't benefited very much from the prosperity." Gore proposes to help them through a series of "very carefully targeted tax cuts and spending programs" that Blinder tots up to about $1.2 trillion over 10 years (Bush adviser Lindsey says they would cost $2.1 trillion). Some examples are tax credits "to make education more affordable" and tax cuts "for the purchase of health insurance."

Lindsey talks mostly about tax cuts in defending Bush's program. They are by far the biggest item, adding up to $1.3 trillion over 10 years. One of the oddities in this year's political-economic debate is that both camps talk almost exclusively in 10-year terms, though even a President elected this year and re-elected in 2004 would serve only eight years. The reason is that the CBO has adopted the 10-year standard in all its budgetary forecasts.

The Bush tax program is mainly a classic expression of Republican philosophy: the surplus should be given back to the people whose taxes created it, and they can spend it more effectively on their own than under government direction. But Lindsey insists that it is also designed to solve social problems and promote equity.

Into the Middle Class
For one thing, Lindsey says, Bush specifically asked him and other advisers to design a program that would make it easier for people to enter the middle class. Lindsey's prime example: a single mother with two children who gets a pay raise from $25,000 to $30,000. Because of the "interaction of taxes"--federal income, Social Security and Medicare taxes, state income tax and a reduction in her federal earned-income credit, the woman would keep only about half of the extra $5,000. Bush's proposed cuts in tax rates and doubling of the tax credit for each child would enable her to keep around $3,300.

Other examples of Bush-style equity: abolishing the inheritance tax, which Lindsey views as unfair (why should the government tax a person's income while he or she is building up an estate, then take away as much as half of it after death?), and reducing income-tax rates on individual proprietorships and partnerships, which now range up to 40%, to the same level as corporations, about 30%. Gore fans regard both as giveaways to the rich.

Deduction Or Wipeout?
Perhaps the most telling difference between the Bush and Gore tax programs concerns the marriage penalty--the quirk in the tax code that causes some working husbands and wives to pay more tax than two single people would on the same incomes. Bush promises he would give a new break to those married couples who did not pay the penalty. Gore, says Blinder, would deal with the penalty in a more progressive way--by raising the standard deduction for married couples, which is taken only by relatively low-income people, in order to target any benefit to the neediest.

The only argument at the TIME meeting that came close to shouting concerned Social Security. Martin Feldstein, president of the National Bureau of Economic Research and a Bush adviser, is a strong advocate of diverting some Social Security tax payments into individual investment accounts. At the meeting, Feldstein described that scheme as the best way to keep politicians from in effect raiding the Social Security surplus to finance lavish spending programs. They would do so, he said, by once more running the non-Social Security budget into deficit and blandly contending that the government as a whole still had a surplus. Reischauer and Blinder replied vehemently that today's politicians wouldn't dare. Feldstein nonetheless insisted that the only way to keep the $2.4 trillion Social Security surplus safe was to put some of it into privately held individual accounts that Congress could not touch.