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Kerry's Spending, Tax Plans Fall Short

Review of Proposals Shows Expenditures Exceeding Savings by $165 Billion

By Jim VandeHei and Brian Faler
Washington Post Staff Writers
Sunday, February 29, 2004; Page A05

Democratic presidential candidate John F. Kerry repeatedly assures voters he can pay for his top domestic priorities and cut the federal deficit, all by rolling back President Bush's tax cuts for top income earners and shutting down corporate tax loopholes.

But a review of his campaign proposals shows that the Democratic front-runner is promising to spend at least $165 billion more on new programs during his first term in office than he could save with his tax plan, a mix of breaks for the middle class and increases for corporations and the most affluent. The $165 billion figure does not include the cost of several proposals Kerry has not fully detailed or backed with estimates.


Sen. John F. Kerry, the Democratic front-runner, attends a town hall meeting in Brooklyn while campaigning for Tuesday's primary election in New York. (Gregory Bull -- AP)


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A policy adviser with Kerry's campaign said the candidate can fulfill his promise to cut the deficit in half by 2009 by slashing spending in other areas and "shedding" or "paring down" some proposals if necessary. Kerry also anticipates stimulating the economy with greater spending during his first two years in office, the adviser said.

The Massachusetts senator has vowed not to touch entitlement programs such as Social Security, which eat up a huge chunk of tax dollars, forcing a likely squeeze or freeze of popular programs to make his deficit-cutting goal. The adviser said it is not uncommon for a campaign's political team to overpromise during the primaries and then turn to the policy staff during the general election battle to cram the pledges into a workable budget.

"When John Kerry outlines the full details of his budget -- both his proposed initiatives and the significant government waste and corporate giveaways he will get rid of -- it will be clear that his vision will reduce the Bush deficit and restore fiscal discipline," said Stephanie Cutter, a Kerry spokeswoman.

A review of John Edwards's campaign proposals indicated that the North Carolina senator appears to cover the cost of his agenda for two chief reasons: He has proposed less than Kerry in new spending -- particularly on health care, the costliest item for both candidates -- and would increase the capital-gains tax rate for Americans making more than $300,000 a year, carving a bigger revenue stream for the federal government.

Bush has promised to cut the deficit in half by 2009, too, though his budget relies on several controversial assumptions, including no new spending on operations in Iraq and cuts Congress is unlikely to approve. The Congressional Budget Office on Friday projected that Bush's budget plan would not halve the deficit in five years and would run up $2.75 trillion in additional debt over the next decade.

With the Bush deficits projected to hit historic heights, Republicans and Democrats expect the federal budget to be a major issue in the election. Deficit reduction rarely ranks among the chief concerns of voters, but Democrats believe Bush is vulnerable to charges he mismanaged the people's money, especially by cutting taxes so deeply for wealthier Americans. The Bush campaign's response: Kerry would tax and spend the country into an economic mess.

Elaine Kamarck, senior policy adviser to the 2000 Al Gore campaign, said it is important that presidential candidates explain how they will pay for their agenda. "We were extremely careful" to make sure Gore's numbers added up, she said, adding that Bush's numbers were not sufficiently scrutinized. "It was possible to predict these terrible deficits as early as 2000," she said, if Bush had been forced then to explain how the country could afford his tax cuts and new spending plans.

Playing to Democratic audiences, who largely oppose the Bush tax cuts, Kerry almost always touts his support for repealing the tax breaks for those making more than $200,000 -- and for beefing up programs that he says the savings would fund. This would mean reinstating a top tax rate of 39 percent and eliminating the breaks for capital gains and dividends available to those top income earners. This repeal would generate more than $200 billion in revenue over four years, according to William G. Gale of the Brookings Institution, a think tank Kerry campaign officials consult on budget numbers. Kerry also projects saving more than $180 billion over the first four years by eliminating loopholes and subsidies for corporations.

What Kerry rarely mentions is that he would extend all the Bush tax cuts for those making less than $200,000, which would cost about $75 billion over the next four years. In 2005, married couples, parents and others would see their taxes go up if the Bush cuts are not extended for this group because several reductions are set to expire; Bush wants the cuts made permanent. Edwards would do the same as Kerry.

In a general election, when Kerry will need to attract moderates and independents, aides said he would highlight not only his support for extending many of the Bush tax cuts but also tout his own, albeit little publicized, tax-reduction plans aimed at the middle class. Kerry has promised tax breaks for education, health care, manufacturers, small businesses and technology companies. His campaign has not detailed how much many of these cuts would cost the government or when they would take effect. Some advisers are pushing Kerry to propose more tax cuts if he wins the nomination.

If Kerry makes good on his tax-cutting promises, budget experts say he will run into the same problem Bush is having with soaring deficits, especially considering his myriad spending programs.

Kerry's advisers said the candidate's support for middle-class tax cuts will help deflect attention from his liberal voting record in the Senate. Republicans are planning to pounce on the large number of new spending programs Kerry has proposed in the campaign, as well as during his Senate career. Like many of his current and former Democratic primary rivals, Kerry has several big-ticket programs in a few key areas: health care, education, national security and the economy.

On the campaign trail, Kerry has proposed, for example, a health care plan that would cost $288 billion over his first four years in office -- although campaign aides say it would also save the government $100 billion over that period, through a variety of cost-saving measures. He would also boost spending on homeland security by more than $20 billion. Kerry wants to provide $50 billion to states grappling with tight budgets, while spending an additional $40 billion on jobs-related programs -- among them, tax breaks for small businesses, manufacturing companies and workers, and technology firms.

Kerry, who voted for Bush's No Child Left Behind education program, has relentlessly criticized Bush for underfunding it, and promises to increase annual funding by at least $8 billion. Kerry would increase spending on special education programs by almost $12 billion per year, and spend an additional $14 billion over four years on programs that help students pay for college education.

Kerry has proposed other, narrower initiatives that would add billions of dollars to the government's yearly bills, including expanding public service programs -- for seniors, teenagers and the Peace Corps -- by several billion dollars annually. And Kerry supports spending an additional $14 billion over the next four years on energy and environmental programs.

Veterans, in particular, would receive generous new support, including mortgage insurance to those in the National Guard and reserves who are called to duty and an increased death gratuity to be paid to the families of those killed in action. Kerry has also proposed providing 1.5 million rental units over the next decade for low-income families, while encouraging the building and rehabilitation of 500,000 homes in poor areas. He supports expanding funding for AIDS programs, including, according to his Web site, providing "at least $30 billion in the fight against AIDS by 2008."

His campaign has offered varying estimates of how much Kerry would spend on veterans programs, AIDS initiatives and urban renewal programs. Aides initially said they would be funded -- along with the plans to expand the preschool program Head Start and the number of police officers on the streets -- by a single pot of money that they estimated to be about $68 billion over the next four years. Aides later reduced that estimate to $54 billion and, later still, said Kerry could pay for all of the plans by squeezing or freezing other programs and eliminating government waste.


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