08/19/96 WHERE SPENDING WOULD HAVE TO BE SLASHED

WHERE SPENDING WOULD HAVE TO BE SLASHED

If candidate Bob Dole's $548 billion tax cut propels him into the White House, President-elect Dole would wake up on Nov. 6 facing an enormous challenge: how to find the huge spending reductions his plan implies.
He wants to cut taxes and still balance the budget by 2002, while sparing three-quarters of federal spending from the ax. By his own reckoning, Dole will have to come up with $832 billion in savings over six years--enough to finance his tax cuts, plus $284 billion in additional payments beyond what's already been budgeted to reduce the deficit. Where on earth does he come up with that kind of dough, with politicians in both parties so fearful of making deep spending cuts? From popular programs, such as Medicare and environmental protection.
But candidate Dole knows it's bad politics to admit that now. Congressional Republicans got their political heads handed to them last year when they tried to pass a budget plan calling for $650 billion in savings over seven years. Dole's advisers have made his job a little easier by updating the old supply-side nostrum that lower tax rates lead to greater economic growth and revenues. In the 1990s version, education subsidies and deregulation--as well as tax cuts--generate more growth. But even Dole's economists could only find $147 billion in fiscal free lunch--the so-called supply-side effect. ``Dole's package is only halfdone,'' says David M. Jones, chief economist at Aubrey G. Lanston & Co. ``Where are the spending cuts to pay for them?''
To keep bond-market vigilantes off his back, President Dole would still have to find at least $685 billion in actual spending cuts. A small chunk would come from Medicare. By embracing last year's GOP budget plan, Dole grabs about $160 billion in savings, trimming about 10% from anticipated spending. He would get an additional $70 billion or so from Medicaid. But Social Security is ``off the table'' according to Dole. So is defense spending. The bulk of the cuts--more than $400 billion--would have to come from all other domestic programs, from national parks to highways.
GOP lawmakers concede they could never pass such a draconian plan, which would mean a 30% cut after inflation. Yet Dole would slash $217 billion on top of that--$136 billion in undefined ``administrative'' and ``other'' spending (table). Those cuts are squishy: Dole says he can save $15 billion a year by hacking administrative costs 10%--the White House says that would only glean about $2 billion.
Where else can Dole get the money? He could cut corporate subsidies and nick the defense budget. But the real money remains where it always has been: in entitlements such as Medicare and Social Security, which are expected to account for 60% of all government spending in 2002. If Dole becomes President, look for him to appoint a bipartisan commission to ``save'' those programs. And don't be surprised if the commission incidentally finds the cash to pay for his generous tax cuts.
By Howard Gleckman in Washington