Who'll Cover the Checks?

Friday, April 25, 2008

THE DEMOCRATIC presidential candidates have some big plans -- with big price tags attached. By our calculations, using figures supplied by the campaigns, Sen. Hillary Rodham Clinton (N.Y.) has proposed new spending and tax breaks that would amount to almost $265 billion a year when fully implemented, while the initiatives proposed by Sen. Barack Obama (Ill.) total nearly $333 billion. Those initiatives, which would be phased in over time and which the candidates say they have identified ways of funding, don't include billions of dollars more in one-time spending.

In addition, both candidates would extend the Bush tax cuts for those making less than $250,000 a year, at an annual cost of another $140 billion in 2012, and renew the research tax credit ($9 billion). And both say they would take steps to prevent the alternative minimum tax from sweeping in additional taxpayers, adding $50 billion or so to the annual price tag. So the deficit -- even before any new spending -- would be that much deeper than it would have been if the tax cuts were permitted to expire.

These numbers, moreover, don't include some initiatives that the candidates talk about but for which they haven't formulated specific policies. For instance, Mr. Obama's campaign Web site says he supports closing the "doughnut hole" in the Medicare prescription drug plan, while Ms. Clinton has promised on the campaign trail to "fix" the hole. That could cost as much as $40 billion annually. Meanwhile, both Democrats put themselves into a new straitjacket at the last debate by promising that they would never raise taxes on the middle class -- which they went on to define generously as those earning less than $200,000 or $250,000 a year.

Altogether, then, they are talking about additional costs to the tune of a half-trillion dollars per year, more (Obama) or less (Clinton). The total federal budget this year is about $2.9 trillion.

Mr. Obama and Ms. Clinton don't pretend to offset the cost of extending the tax cuts or fixing the alternative minimum tax, but then, the presumptive Republican nominee, Sen. John McCain (Ariz.), would do the same and more without paying for it. As to the new spending, both candidates say they have identified "pay-fors" that would more than cover the cost of the new initiatives. But will these savings materialize? Some of those savings, for example, from undoing part of the Bush tax cuts, can be measured with certainty; others, such as wringing tens of billions of dollars in costs out of the health-care system, are gauzy and speculative; still others -- doing away with corporate subsidies, say -- would be politically tough to achieve.

Are the candidates understating expected costs? The Obama campaign claims that the Clinton health-care plan would cost $30 billion more than she acknowledges, while the Clinton campaign claims that the Obama campaign is aggressively overestimating its expected health-care savings by about the same amount. The argument simply underscores the uncertainty on both the spending and savings sides of both candidates' grand plans.

Frugal wouldn't be a word we would use to describe either candidate. Mr. Obama, whose program would cost more primarily because of his large tax cut, relies more than Ms. Clinton does on expected savings from winding down the war in Iraq and on significant revenue from auctioning permits for a cap-and-trade system to curb carbon emissions in order to get to theoretical balance. Ms. Clinton has also been clearer about specifying costs and precise sources of funding.

While both Democratic candidates would spend far more on new programs than Mr. McCain would, the Republican's proposals for new tax cuts dwarf the Democrats' plans. The Democrats are clearer than Mr. McCain -- though that's a relative term -- about how they would foot the bill. Still, no one's winning any awards this campaign season for fiscal responsibility.

Other editorials in the Ideas Primary, a series of editorials on the issues of the presidential race, can be found here.

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