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Will A Black Political Chess Player Emerge In Budget Warfare?


Walking the minefields of budget politics in Washington D.C. requires great skill. In order to do so in a manner that guides an entire political party, produces a public relations victory and results in re-election, a member of Congress must be a political chess-player of immense proportions as well as adept at explaining the intricate budget process and the basics of economic theory. Those who are able to do so are few and far between. The Black electorate has never had a politician able to accomplish the feat.

The current debate over the dwindling budget surplus and the possibility that Social Security funds will have to be tapped into, has us longing for the appearance of that grand politician who can guide the voting public, their own political party, and members of the media, through the smokescreen and mirrors that have been set up by politicians in both parties over the last three years, in particular. The budget shell game – where money is mysteriously moved from account to account and where projections consistently fail in their ability to accurately predict economic growth and tax revenues, reached new heights last week when it was announced by the Congressional Budget Office (CBO) that the projected budget surplus was dwindling due to the slowdown in the U.S. economy.

The news lit a political match, which had leading Democrats and Republicans casting blame at one another. The Dems were the loudest of the two groups, claiming that President Bush's tax cut deserves the blame for the possibility - according to the CBO -that the Social Security surplus will have to be tapped, to the tune of $9 billion, in order for the government to pay its bills. The GOP countered with its argument that it was not the tax cut, but rather, increased spending that should be held responsible for any fingers that may find their way into the Social Security "lockbox".

Now, the whole idea of a "lockbox" is right up there with Santa Claus and the tooth fairy, in that the "social security lockbox" simply does not exist. But because of the considerable political abilities of President Clinton and a cast of Republican members of Congress who followed his lead (with their own goals in mind), almost everyone in Washington D.C. has been led to believe for the last three years, that there is such an entity. To say that there is no such entity requires an explanation.

Fortunately, breaking through the smokescreen regarding the lockbox is fairly easy. One only needs to know that today Washington's bean counters keep track of 1) the Social Security budget 2) the budget for the rest of the government and 3) both budgets combined. President Clinton, with his "save social security first" pledge, is the man that we all can thank for popularizing the distinctions made between the three ways in which the federal budget is viewed. Before him, the budget was generally viewed as one entity, with Social Security tax revenues and those coming from other forms of taxation, like the income tax, all lumped together. The key to understanding what has happened lies in grasping that in each year since 1983, Social Security has brought in more revenue from payroll taxes than it has paid out in Social Security benefits. This is the beginning of the "social security surplus". Politicians never mentioned that "surplus" because they were using it to finance other programs — all while they still had to borrow money to finance the now famous budget deficits of the 1980s.

Of course, those deficits came to an end in the late 1990s. In those post-deficit years of the Clinton administration, the government brought in so much tax revenue, from income, corporate and capital gains taxes, that Washington was able to pay all of its yearly bills without using the aforementioned "social security surplus". But last week ended that era, with the CBO's latest budget forecast showing that the government will "have" to take $9 billion from this year's Social Security surplus to fund other programs.

When looked at in the context of politics and the shape of the federal budget over the last 20 years, the CBO's projections should be seen as little more than a slight disappointment, especially since the $9 billion only amounts to 5.6% of the $162 billion surplus Social Security will run this year. The remaining $153 billion will still be used for debt reduction.

But because partisan politics and election victories are more important than accuracy, Democrats have seized the opportunity to strike at President Bush and the Republicans by depicting his tax cut as the villain responsible for returning America to an era of deficits. President Bush's stubborn response has been to say that he will not need to tap into the social security surplus in order to meet government expenditures (of course he provides his own actuarial work to support his claim) and that there will be enough money available, from the non-social security-related portion of the budget to pay for $1 billion more in education spending and $18 billion for defense spending!

Of course, the inevitable compromise is in the works. We are hearing that Democrats are looking to cut a deal with Bush regarding the $18 billion that he desires for increased defense spending. The arrangement would result in Congress granting $9 billion for a defense spending increase, if the remaining $9 billion will go to a Democrat-crafted education increase, but of course, only if the "surplus" numbers work out as planned.

But none of the deal-making that we are apprised of addresses the single-biggest factor weighing on the federal budget: slowing economic growth. With both parties relying upon static analysis to attack one another, neither group is willing to acknowledge that the budget and fiscal policy do play a role in fostering or slowing economic growth and therefore the amount of taxes that travel into the U.S. Treasury. An economy that is growing produces more tax revenue than one that is slowing down or which has become idle. Tax cuts and/or spending programs, if applied just right, can lead to increased government tax revenue intake.

We realize that such a view represents a violation of the political establishment's orthodoxy, with Democrats hating all tax cuts and Republicans hating all spending increases, so they say.  But a violation of political doctrine is exactly what is needed now.  A political chess-player, adept in budget politics and economics 101 is just the heretic that could ensure not only his or her political fortunes, but also that of their political party in the 2002 elections, with a dividend to be paid in the 2004 election.  This will especially be true should the U.S. economy enter into a recession.

Unfortunately, the most prominent individual who has realized this, politicaly speaking, and who has publicly articulated such, is no longer part of government. Last week former Secretary of Labor, Robert Reich, powerfully advanced the argument(s) that are necessary for the budget debate to rise above the dishonest, incomplete and incoherent levels in which they currently languish. In an almost seamless op-ed written for the Wall St. Journal, he wrote:
  
The Bush administration should state flatly that it doesn't matter if the so-called Social Security surplus erodes this year, or even next. The Social Security surplus is an accounting fiction. It didn't even exist until about 18 months ago, when some Democratic advisors thought such an invention might be a good bulwark against candidate Bush's proposed tax cut. In light of swelling surpluses, merely to "Save Social Security First"wasn't enough of a defense, so Democrats raised the rhetorical bar to "Save the Social Security Surplus First." Republicans were cowed into agreeing that we should put the surplus some place where it couldn't be touched.

This fictional "lock box" was harmless enough when the economy was booming but makes no sense when it's slowing. The White House should be clear with the public: Under current conditions it's perfectly permissible for total government expenses to rise relative to total revenues, including revenues from payroll taxes and current payouts for Social Security. And Democrats should stop their bellyaching about "raids."

The second objective of fiscal policy is to help enlarge the nation's productive capacity over the long term. Conservatives believe the best way to do this is to allow people to keep more of the money they earn rather than pay it in taxes. Liberals believe the best way is to spend more money on improving the quality of the nation's "human capital" and infrastructure --schools, child health care, mass transit, and so on. Both are "supply side" rationales. There is a legitimate debate to be had about which is more correct, and an even more important one about how and under what circumstances tax cuts can best stimulate investment and innovation, and when additional expenditure on schools or other "public investments" can have the largest positive impact.


Reich's arguments are cutting-edge and could be used with equal success by either a Black Democrat or Black Republican.  His arguments can guide that politician who is looking to produce the most important change possible in the budget debate.

That our chess-player would appear among the Republicans, despite their rhetoric, is not very likely, considering that for better or worse, Republicans have wed themselves to Bush's trillion-dollar tax cut, even going so far as to say that his plan will spur economic growth.  The Bush plan will do nothing of the sort for the economy and any Republican who would admit that, risks falling out of favor with the White House and the Republican Party establishment.  And with that reality goes our outside hope that Rep. J.C. Watts would be the Black politician that would make the case for growth-oriented tax cuts or for growth-oriented spending initiatives.  

If the CBO were pressured by a Republican to use dynamic scoring in its budget projections it would be easy to make the case for the appropriate mixture of tax cuts and the spending programs necessary to breathe life back into the American economy - which would result in increased tax revenues.    But Republicans, at this stage, are too frigid to take the risk and opportunity necessary to make dynamic scoring the law of the land at CBO. After all, they figure, they successfully shoved a Republican in the White House, and maintained control of the House - all of the important battles have been won. And who needs a Black Republican, of all people, to lead an accounting revolution that condemns the Republican-in-Chief?
            
In budget politics, Black Democratic politicians have traditionally sat at the back of the bus, content to let the Party leadership make the final determination regarding what positions and arguments should be made regarding the budget, tax cuts and spending.  Each year the Congressional Black Caucus submits a budget that allows it to highlight what it believes should be the country's top priorities, and each year the budget is summarily dismissed by Republicans and fellow Democrats alike.

Today the situation is much the same with only Congressman Bennie Thompson of Mississippi, representing on the House Budget committee.  So far, Rep. Thompson, in agreement with his party, has only been directing his arguments against the Bush tax cut.  And he will continue to receive pressure from Democrats to not make dynamic arguments which promote tax cuts and/or additional spending, as long as those cuts and expenditures are projected to increase economic growth and tax revenues, in the short or long-term.
  
If Rep. Thompson were to make the case for dynamic analysis he would bump heads with the establishment in the Democratic Party, led by Terry McAuliffe, the Party chairman who wasted no time last week in depicting the CBO's projections as evidence that President Bush was breaking campaign promises and raiding Social Security and Medicare.  

But the Black electorate stands the least to benefit from saving Social Security and Medicare, an issue that was crafted by Democrats with winning the White senior vote in mind.  With Blacks at the bottom of the economic ladder, no other group stands to benefit so much from the appropriate mixture of growth-oriented tax cuts and spending programs.  The safe money says that a Black Democrat would not break ranks with his or her party on this issue, but considering that Rep. Thompson was part of a group of Black Democrats who backed Maynard Jackson and not McAuliffe for Democratic Party Chair, there remains an outside chance that Rep. Thompson could break ranks with the Party talking-point machinery, if he sees Democrats losing ground on the budget issue in the court of public opinion - a scenario that Rep. Thompson has no stomach for, considering that if the Democrats take the House back in 2002, several members of the Black Caucus assume chair positions on numerous Congressional committees and sub-committees.  

Remember, our political chess-player has to see electoral fortune in his or her maneuvering.

Note: If you are interested in consistently receiving our analytical commentaries regarding the latest developments in the ongoing budget debate and how the Black electorate is affected, please join our mailing list in order to receive more information on how you can become a client of our new product, which provides analysis of the Black political economy.


Cedric Muhammad

Tuesday, September 4, 2001

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