Clinton's 'fiscal responsibility' a sham, critics say

McClatchy NewspapersNovember 27, 2007 

WASHINGTON — New York Sen. Hillary Clinton vows that as president, she'd return the country to "fiscal responsibility," but critics charge that her proposals could blow a hole worth hundreds of billions of dollars in the deficit and even would provide a tax cut to some of America's richest people.

The Democratic front-runner says her torrent of promises — which would cost hundreds of billions of dollars — is paid for.

"What Senator Clinton has said throughout the campaign is that she will pay for every single proposal without increasing the deficit," said Brian Deese, a policy analyst with the Clinton campaign. "Focusing on a commitment to pay-as-you-go would be a dramatic change from the Bush administration."

But pledging not to increase the deficit — as opposed to reducing it — isn't real fiscal responsibility, critics say, questioning Clinton's method of payment for her most prominent, most expensive proposals:

  • To pay for her $100-billion-a-year-plus health care plan, Clinton would allow President Bush's tax cuts for those who earn more than $250,000 a year to expire, as scheduled, in 2010.
  • To pay for her $25-billion-a-year retirement security plan and for half of her $8 billion-a-year college tuition assistance plan, she'd freeze the estate tax at 2009 levels.

Allowing Bush's tax cuts to expire in order to pay for health care doesn't do anything to restore fiscal responsibility because it's spending money that otherwise would flow into federal coffers to reduce the deficit, said Len Burman, the director of the Tax Policy Center, a joint project of the center-left Brookings Institution and the Urban Institute.

"Senator Clinton and President Bush agree on the right level of deficits," Burman said. "They disagree on whether you should have tax cuts for rich people or health care."

Lee Farris, a federal tax policy coordinator for United for a Fair Economy, a left-leaning Boston-based advocacy group, said that Clinton's health plan "is not deficit-neutral, it's deficit-worsening. . . . That money in 2011(from the expired tax cuts) is already claimed. When people spend money for programs already agreed to, they're counting on that money being there in 2011."

Worse, critics say, Clinton's pledge to freeze the estate tax at 2009 levels would cost the Treasury hundreds of billions of dollars.

That's because although the estate tax is set to expire in 2010, it's due to return in 2011 — at 2001 levels, which are far higher than the 2009 levels that Clinton wants to keep.

Setting the estate tax at 2009 levels would cost the Treasury $29 billion in 2012 and a total of $232 billion by 2017, according to the Congressional Budget Office. From 2012 to 2021, it would cost more than $400 billion, according to an independent analysis by the Center on Budget and Policy Priorities, a center-left Washington policy group.

"Under current law, it's a tax cut, and it's going to the wealthiest 2 percent of estates," said Aviva Aron-Dine, a policy analyst at the center.

The Clinton camp says that it's unfair to examine her proposals under current law.

Deese points out that the Bush administration's budget projections include the expectation that Bush's tax cuts will be extended and that the estate tax won't return as scheduled. And the Clinton campaign says that large front-end investments in health care will lead to savings later on through the use of technology, improvement in individual health and a more efficient system.

"The choices in this election are stark," Deese said. "Republicans want to extend the Bush tax cuts for upper-income Americans permanently. Senator Clinton wants to use some of that that money to make important investments. That's a big choice."

Clinton is hardly alone in sidestepping fiscal realities. Her chief rival for the Democratic presidential nomination, Sen. Barack Obama of Illinois, has proposed at least $181 billion in new annual spending on middle-class tax cuts, health care and retirement and energy plans. Many of his plans also rely on the "savings" allegedly generated by allowing the Bush tax cuts to expire, plus raising other taxes. Some question, however, whether his new taxes would raise enough to pay for his proposals.

On the Republican side, former Tennessee Sen. Fred Thompson and former Massachusetts Gov. Mitt Romney recently proposed enormous increases in defense spending. Neither said how they'd pay for them.

Given the budget deficit, the costs of the Iraq war and resupplying the military and the massive expenditures looming for entitlement programs such as Social Security and Medicare, it's likely that the next president will have to do something similar to what the first Bush administration did in 1990 and the Clinton administration did in 1993: a combination of tax increases and spending cuts to ensure real fiscal stability, said Joseph Minarik, a Clinton administration budget official who's now the senior vice president of the Committee for Economic Development, a centrist economic policy group in Washington.

"The problem is, both parties want to talk about goodies. They don't want to talk about hard choices," Burman said.

A SAMPLING OF CLINTON'S PROPOSED SPENDING:

Annual new spending:

  • Health care: $100 billion-plus
  • Retirement: $20-$25 billion
  • Energy: $10 billion
  • Family leave/child care: $1.75 billion
  • Tuition assistance: $8 billion
  • Transportation/transit: $2.5 billion
  • Education: $5 billion
  • Scientific research: $2.8 billion

Other new spending:

  • Energy: $50 billion
  • Foreclosure assistance: $1 billion
  • Passenger rail: $1 billion
  • Affordable housing: $1 billion

McClatchy Newspapers 2007

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