AT LEAST every four years, the politicians rediscover a device that allows them to propose either tax cuts or spending increases without affecting fiscal discipline. The presidential candidates reach the promised land by postulating stronger economic growth. To the candidate and his adherents, the assumption makes good sense. Why wouldn't the economy grow faster under the policies of so wise a leader?
The faster growth rate does all sorts of good things to the numbers. The presumed increase in economic activity translates into higher estimates of employment, incomes, profits and thereby tax receipts. But because the greater growth is almost always assumed to be noninflationary, there is no corresponding increase in prices or government costs. That best of both worlds leaves lots of room on paper for new initiatives.
George W. Bush would finance his proposed tax cut out of a projected budget surplus that derives in part from a modestly stepped-up growth assumption -- to 2.7 percent over the long run. The Congressional Budget Office has been using a slightly lower figure, though it may revise its estimate upward early next year on the strength of the economy's strong performance. The Bush people say their figure remains conservative, and maybe so; the economy continues to expand without inflation in defiance of traditional expectations.
But whatever may be the right figure, the higher projection helps the candidate; that much is clear. The possibility helps Bill Bradley too. He wants to reduce the percentage of Americans who lack health insurance. To do so while meeting the rest of the government's obligations as the baby boomers retire will be expensive. The former senator fends off questions about whether the proposal implies a tax increase by suggesting that growth may be stronger than expected; maybe the economy will pay the bill.
Our sense is that it's wrong to base major policy on so weak a reed. Bill Clinton, after some early hesitation, did the opposite in 1993 and spent some political capital to push a tax increase through Congress. The increase helped reduce the deficit; the greater discipline appears to have helped to sustain the current economic expansion, now in its ninth year. The comfort lies in thinking of the campaign as a metaphor in which the candidates aren't committing to particular plans so much as describing the directions in which they will strive if elected and if they have the means. The time to decide how to spend a growth dividend is after it occurs.