Vice President Al Gore speaks to supporters at the Teamsters Local 89 union hall Thursday in Louisville, Ky. (AP)

By George Hager and Ceci Connolly
Washington Post Staff Writers
Saturday, October 9, 1999; Page A1

After a decade of huge deficits, the 2000 presidential campaign will be the first to take place in an era of budget surpluses -- the result of a booming economy that is projected to yield far more in revenue than the government will spend over the next 10 years. Yet even with an estimated $1 trillion pot of money to spend (not including extra cash generated by Social Security taxes), the leading candidates are having trouble making their spending proposals match the available money.

Far more than the Republicans in the race, the two Democrats have both proposed ambitious spending initiatives that they say offer the best opportunity for capitalizing on America's prosperity.

To calculate the budgetary impact of the initiatives, The Washington Post consulted published White House and nonpartisan Congressional Budget Office (CBO) projections and asked independent budget experts to analyze the two Democrats' campaign promises. In many instances, the two candidates' proposals mirror policy ideas for which cost estimates already have been calculated.

Bradley's ambitious universal health care proposal -- estimated by his campaign to cost $65 billion annually -- would likely eat up more than the 10-year total surplus. Simply adding a conservative 5 percent annual inflation factor would boost the cost to more than $800 billion, and analysts say his estimates for providing prescription drugs are unrealistically low.

And while Gore's health plan would cost much less, the major proposals he has made as a candidate or endorsed as vice president -- tax cuts, universal preschool and extra spending for defense, education and other programs -- could amount to as much as $1.25 trillion over the next 10 years, according to CBO estimates and calculations by other analysts.

Yesterday, both campaigns insisted their proposals will not exceed the surplus.

The Gore campaign, presented with the apparent overspending, cut its previously announced tax cut projections in half, from $310 billion to $150 billion, and revealed that the vice president's preschool proposal is far more modest than initially suggested. By making those adjustments, aides shaved enough from Gore's total spending to bring his proposals back within a balanced budget.

"Everything that the vice president has talked about since he began laying out his own campaign proposals fit within realistic assumptions about the size of the surplus," said Elaine Kamarck, Gore's chief policy adviser.

Yet if Bradley and Gore continue to make expensive new spending proposals, they will face three options: dipping into the Social Security surplus, raising taxes or cutting other popular programs.

The CBO projects a budget surplus of $2.9 trillion over the next 10 years, but $1.9 trillion of that will come from the excess payroll taxes being collected to fund baby boomer retirement benefits in the next century -- money that both parties consider to be politically off limits. That leaves $1 trillion in non-Social Security surplus for the candidates to work with from 2000 to 2009.

On the campaign trail, both Bradley and Gore praise President Clinton's economic achievements but say it is time to extend the prosperity to more Americans.

"While we have strengthened our economy, we now have a chance to strengthen the families that are the hope and soul of our nation," Gore said on July 30 when he laid out his tax cut ideas and endorsed a plan by congressional Democrats to provide $250 billion to $295 billion in tax relief.

Democrats aren't the only ones with potential budget problems. Simply by endorsing the GOP-controlled Congress's $792 billion, 10-year tax cut, Texas Gov. George W. Bush, Arizona Sen. John McCain and the other Republican candidates effectively spent most of the non-Social Security surplus as well.

It is the Democratic candidates, though, who have relied most heavily on new government programs to bolster their candidacies.

So far, the centerpiece of Bradley's agenda is his health care plan, which aims to cover most of the nation's uninsured at a cost he put at $55 billion to $65 billion a year. He gave no 10-year figure. But Kenneth E. Thorpe, a former deputy assistant secretary for health policy at the Department of Health and Human Services, said Bradley underestimated what it will take to provide prescription drugs to the growing elderly population.

More realistic drug costs, inflation and other factors would drive the total cost to almost $1.1 trillion over 10 years, said Thorpe, who was in charge of estimating the costs of the Clinton administration's health care proposals in 1993-95. He is now a professor of health policy at Emory University in Atlanta.

Bradley advisers said Thorpe's estimate was much too high, but they declined to provide an alternative 10-year cost projection. Instead, they said it was unfair to try to estimate the cost of the health care plan over a decade without accounting for factors that could drive health care costs down.

Bradley spokesman Eric Hauser said the net result of the plan's near-universal coverage would be to drive down overall federal health care costs by cutting expenses such as the money the government pays hospitals for treating uninsured patients.

"The agenda we're laying out is laid out against the idea of a balanced budget," Hauser said.

The bulk of the cost of Gore's proposals comes from an estimate of this year's White House budget calculated by CBO. The analysts there projected the Clinton-Gore administration would spend $937 billion of the $1 trillion non-Social Security surplus over the next 10 years. Major items included a prescription drug benefit for Medicare beneficiaries and extra spending for defense, education and the environment.

Since he began campaigning, Gore has added his own proposals, only once publicly rejecting a Clinton priority he has supported as vice president.

This summer, in two speeches, Gore offered what aides said were $310 billion worth of tax cuts that would substitute for the administration's proposed $245 billion in tax breaks for USA savings accounts. But the Gore campaign said yesterday that the tax package would actually provide about $150 billion in tax cuts.

As for Gore's health care proposal, Thorpe put the cost at $157 billion over 10 years, noting that it would cover far fewer of the nation's uninsured. The Gore campaign yesterday provided a slightly lower estimate of $146 billion over 10 years for its plan.

Estimating the cost of Gore's call for universal preschool illustrates the trickiness of costing out a candidate's proposals. Until yesterday, the Gore campaign had provided few specifics and no cost estimates. So budget analysts were left to guess at the details. Did that mean the federal government would pick up the whole cost, or just part of it? And would preschool be available for all 3-year-olds and 4-year-olds, or just for 4-year-olds?

A limited program that would cover just 4-year-olds would cost roughly $100 billion over 10 years, according to Isabel V. Sawhill, a senior fellow at the Brookings Institution. Adding 3-year-olds would more than double that figure.

Presented with that estimate, the Gore campaign revealed yesterday that it is proposing only about $50 billion worth of block grants to states to help make preschool available to all children. In some cases, Gore officials said, parents would pick up the actual cost.

Taken together, the new details provided yesterday about Gore's plan appear to allow the candidate to tuck his proposals just inside the confines of the available non-Social Security surplus.

Said Kamarck: "The plan has always been that the vice president would present a balanced budget and a fiscally responsible plan for dealing with the surplus."