Fiscal War, AWOL Candidates

Bad news: McCain, Obama, and Clinton don't know much about economics

For some time now, the three presidential candidates have been striving to outdo each other on what Hillary Clinton calls "the commander-in-chief" test. She says that she and John McCain have passed it. McCain's response has been on the order of, "What do you mean, 'we'?" Recently, Barack Obama assembled a passel of retired generals and admirals to publicly salute him.

It's good to know they are preparing themselves for that 3 a.m. phone call. But I'm not convinced any of them is ready for the 8 a.m. call from the budget director reporting that the deficit is raging out of control. When it comes to combating the fiscal menaces we face, these three are all absent without leave.

The budget situation is already dire. In the last six years, the federal government has spent some $1.8 trillion more than it has taken in. This year, the deficit will hit an estimated $410 billion. If the economy falls into a recession, the gap will grow.

Believe it or not, these are the good old days. In the next few years, the budget will begin to show the effects of a mammoth event that has long been dreaded: the retirement of the baby boomers. Social Security and Medicare already account for one-third of federal spending, and over the next 30 years, they are expected to nearly double in cost as a share of the total economy.

A recent report from the Brookings Institution found that just to pay for all federal outlays, we would have to raise taxes by at least one-third by 2030. To avoid such tax increases without cutting Social Security, Medicare and Medicaid, our leaders would have to make cuts of 50 percent or more in all the other federal programs. Or we could slash benefits for the elderly.

Clearly, some hard fiscal decisions will have to be made. But you would never know any of this from listening to presidential campaign speeches. The candidates all act as though we've time to kill and money to burn. None has made a priority of finding ways to live within our means.

The parties do have their differences. Obama and Clinton spend most of their time dreaming up new programs. The National Taxpayers Union Foundation (NTUF) estimates that his plan would boost federal spending by some $287 billion a year, while hers would carry an annual price tag of $218 billion.

They claim they can pay for most of this by raising taxes on the wealthy and ending the war in Iraq. But the first would bring in no more than $100 billion a year or so. And the money we are spending in Iraq is money we don't have in the first place. It's like saying, I can't afford a Hawaiian vacation, so
I'll take the money I'm not spending on that to buy a Mercedes. The clear implication is that either of the Democrats will finance their proposals the same way President Bush has financed his—by sending the bill to our kids.

For all his stern talk about eradicating earmarks, John McCain would take a similar approach. True, he is much less inclined to launch new initiatives, but he spurns the notion of paying for all the expenses we currently have, much less the ones looming ahead.

He says he would not increase taxes under any circumstances. That would be lovely if McCain were proposing deep cuts in the federal budget to eliminate the growing deficit. In fact, NTUF calculates, his plans would increase federal spending by $7 billion a year.

As the Brookings report put it, "Some people might believe that the federal government should both tax and spend at about 18 percent of gross domestic product (GDP), while others might believe it should tax and spend at about 30 percent of GDP. No reasonable person, however, would argue that the government should tax at 18 percent and spend at 30 percent. … Yet, this is the future we will get if we try to fund the spending required by current law with today's level of taxation."

It's 8 a.m., a fiscal crisis is at hand, and the phone is ringing in the White House. Will the next president take the call or let it go to voicemail?

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