St. Louis Post-Dispatch

August 19, 2001 Sunday Five Star Lift Edition

SECTION: EDITORIAL; Pg. B2

VOODOO, JR.

ECONOMIC GROWTH

BY LISTENING carefully, you could hear the first faint shots of the 2002 congressional election campaign last week. The issue was the Bush administration's midyear budget update, wherein the White House forecast 3.2 percent economic growth next year. That's nearly double this year's 1.7 percent growth rate and much higher than most private economic forecasters estimate. Democrats, including House Minority Leader Richard A. Gephardt of St. Louis, pounced immediately. Mr. Gephardt said the figures proved the Bush administration would "twist and turn the numbers in an effort to hide the reality, which is that (President George W.) Bush's tax cut has put him on a path headed straight for the Medicare and Social Security surpluses."

Ari Fleischer, Mr. Bush's press secretary, defended the 2002 growth estimate as "conservative," pointing out that some economists forecast growth of 4 percent next year. And so the battle is joined. Mr. Gephardt believes the economy will be a powerful issue in the Democrats' effort to regain control of the House. Democrats say the effect of Mr. Bush's $1.3 trillion tax cut, along with the slumping economy, means the administration will run deficits next year or tap the Social Security trust fund to make ends meet.

Mr. Bush inherited a $125 billion surplus in January. The first year of the 10-year tax cut took a $74 billion bite, and the slowing economy took another $40 billion. In addition, the administration moved the deadline for $33 billion in corporate tax payments into 2002, so the revenue would be available for Mr. Bush's priorities. To make ends meet, the administration changed a 65-year-old accounting practice on back payments of Social Security taxes to pick up another $4.3 billion.

Sound budget practice, say the Republicans. Son of Voodoo Economics, say the Democrats. We'll have a better idea of who is right this week, when the Office of Management and Budget releases its own estimates of economic growth, and the week after, when Congressional Budget Office releases its estimates.

What is clear, though, is that Mr. Bush's ill-conceived tax cut is already threatening to unbalance the budget. Unless the economy starts booming again, plans for increased military spending and a prescription drug plan for seniors may have to be put on hold. The nation can't have both tax cuts and more spending, no matter how rosy the scenario or how clever the gimmicks.