- The Washington Times - Thursday, September 30, 2004

John Kerry has pledged to cut the budget deficit even as he carries out policies drastically increasing federal spending. How much would he have to raise taxes to make good on both promises? Between $2,090 and $2,829 per household, on top of his already promised tax increases.

Specifically, Mr. Kerry says he will cut the current $422 billion budget deficit in half by 2008. At the same time, he proposes raising federal spending and making permanent the Bush tax cuts for lower- and middle-income families. Mr. Kerry claims he can do this all simply by rescinding the Bush tax cuts for the “wealthy,” which he defines (at the moment) as households earning more than $200,000.

Let’s break down the numbers.

The American Enterprise Institute, using third-party sources such as the Congressional Budget Office (CBO), estimates Mr. Kerry’s spending and targeted tax proposals would cost $1.7 trillion over the next decade. Adding in his plan to alter the Bush tax cuts would increase the deficit $438 billion, according to the Heritage Foundation. Then there is Mr. Kerry’s pledge to fix the Alternative Minimum Tax, which CBO says would cost $340 billion. Include the total added net interest from these policies, and you have another $586 billion.

Taken together, these policies would add $3.1 trillion in additional budget deficits over the next decade. Rather than halve the $422 billion budget deficit by 2008, Mr. Kerry’s budget would actually push it up to $525 billion.

Skeptical readers may prefer an estimate based on the Kerry campaign itself, or on other liberal-leaning sources. They’re in luck. The Kerry campaign’s Web site concedes $1.1 trillion in proposed new spending and targeted tax credits over the next decade (based on gimmicks that would make an Enron executive blush). The Urban Institute sees Mr. Kerry’s tax-cut alteration boosting the budget deficit by $364 billion. Add in the aforementioned $340 billion to fix the Alternative Minimum Tax and the new debt interest payment of $448 billion.

Even this benefit-of-every-doubt calculation shows Mr. Kerry would add $2.3 trillion to the budget deficit over the next decade. That 2008 budget deficit would reach $443 billion. Again, he is increasing the deficit, not halving it.

These estimates aren’t surprising. Mr. Kerry’s proposal to shave $211 billion off the budget deficit while also spending nearly $2 trillion more — on everything from health care to business subsidies to endangered-species protection to high-speed rail to free college tuition for volunteers — doesn’t pass the smell test. No tax increase restricted to those earning more than $200,000 can bridge so large a gap.

So how would Mr. Kerry deal with this mathematical reality? When former President Bill Clinton’s campaign promises proved incompatible with his deficit-reduction pledge, he bridged the gap with large, broad-based tax increases. If Mr. Kerry chooses the same route, he would have to raise taxes by $2,090 to $2,829 per household (depending on which budget estimate is used) in addition to his current proposed tax increases.

And after all this, Mr. Kerry’s budget still ignores the most important economic challenge of our time: the $44 trillion shortfall in Social Security and Medicare.

Whoever is elected this year will be in the White House when the first Baby Boomers reach early retirement on Jan. 1, 2008. Without reform, Social Security and Medicare will eventually require tax increases that, at today’s prices and incomes, would top $10,000 per household. Mr. Kerry has presented no plan to avert this catastrophe. Even if he cuts $211 billion off the 2008 budget deficit, it will matter little compared to ignoring massive long-term Social Security and Medicare costs.

When politicians make promises, it pays to run the numbers. In this case, the numbers give Americans an idea of just how much taxes might rise under a Kerry administration. And it gives us the basis for debating something even more critical: how such a tax increase on families and small businesses would affect job-creating investment and economic growth.

In short, are we willing to pay a huge price for a deficit-reduction plan that doesn’t work?

Brian Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at the Heritage Foundation.

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide