- The Washington Times - Monday, May 14, 2001

The Blue Dog coalition of once-centrist House Democrats has lurched sharply to the left lately, promoting a Hoover-era fiscal policy that puts debt repayment ahead of lower taxes to spur economic growth.

The 32-member group of mostly Southern Democrats once championed moderate alternatives to the loony left of their party. Now their rhetoric sounds indistinguishable from that of their liberal colleagues. They have become mindlessly myopic about debt reduction, doom-and-gloom skeptics about the surpluses´ staying power, and fierce opponents of significantly cutting tax rates to revive a weakened economy.

The night before the House passed the budget bill last week, calling for $2 trillion in spending over the next fiscal year and cutting taxes by $1.35 trillion over 10 years, the Blue Dogs voted to oppose it for a lot of silly, specious reasons.

Led by Rep. Chris John of Louisiana, they put out a statement explaining their opposition, beginning with the ridiculous declaration that the budget "Contains no debt reduction."

"Aside from funds already committed to Medicare and Social Security Trust Funds, this budget doesn´t devote a single dollar over the entire decade toward paying down our national debt," they maintained. "This sacrifices our opportunity to entirely pay off the publicly held debt by 2010."

Huh? The budget would use all of the surpluses from the payroll taxes to reduce the publicly held debt by $2.4 trillion, shrinking it down to about $818 billion in 2011. That would make it a relatively small and very manageable fraction of the revenue the government will receive by then.

Moreover, it would be exorbitantly wasteful to cut the debt to zero, as they demand. To do so, the Congressional Budget Office says, the Treasury would have to pay expensive premiums or penalty payments to buy back notes long before they are due. Why would the Blue Dogs want to pay the central banks of China, Japan and other foreign financial institutions the costly premium they would demand for a relatively small amount of money that will eventually be paid off in a few years anyway?

As Chairman Alan Greenspan of the Federal Reserve Board has testified, "Inducing such holders, including foreign holders, to willingly offer to sell their securities prior to maturity could require paying premiums that far exceed any realistic value of retiring the debt before maturity."

Then the Blue Dogs hysterically complain that the budget plan "bets the ranch on projected surpluses. This budget gambles on budget projections that have been wrong over and over again."

The projections have been wrong, all right, but CBO´s error was, first, to insist in the early ´90s that there would be no surpluses. Then they kept underestimating the size of the surplus as it steadily rose. Their forecast now puts the surplus at about $5.6 trillion over 10 years, but it is far from a gamble.

This projection is about as cautious as forecasts can get. It factors in at least two recessions over the next decade. And it assumes that revenue growth will lag behind economic growth, even though "annual revenue growth has historically exceeded GDP growth by 0.7 percent on average over the last several decades, through good and bad economies," says the Office of Management and Budget.

The Blue Dogs say the budget will "put us at risk of returning to deficit spending financed by borrowing from the Social Security and Medicare trust funds and leave no room for the promised increases in defense, agriculture and other areas."

This is fearmongering at its worst. These claims have no basis in fact.

If the aggregate surpluses were to decline because of a downturn in the economy (which I do not think will happen over the 10 years of the budget plan), spending can always be adjusted accordingly; or, we could borrow a little to tide us over, which would be would not be a bad thing to do for a $2 trillion a year enterprise. Families do it, businesses do it, governments throughout the world do it.

As for an unexpected shortfall leaving no room to fund priorities, this is just not true. The budget sets aside nearly $1 trillion for unforeseen expenses in the future. It also contains about $300 billion over the next 10 years to provide a prescription drug benefit. Farmers would get $76 billion more in aid over this period. Defense needs will be met. Social Security and Medicare funds will not be spent.

The Blue Dogs also complain that the budget sets "unrealistic spending levels likely to result in a 'train wreck´ in the appropriations bills at the end of the year."

Actually, this budget calls for modestly slowing the rise in spending to 4 percent a year, down from the unsustainable 6-percent-a-year (on average) increases that have wasted billions of tax dollars. The Blue Dogs do not say anything about this restraint. Apparently, they want to spend more.

What a shame. The Blue Dogs were once a voice of moderation in a party that has become addicted to spending and big government. Now they are sounding like their liberal colleagues, making exaggerated and hysterical charges and preaching fiscal pessimism, doom and fear. House Democratic Leader Dick Gephardt couldn´t be happier.


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