BUSINESSWEEK ONLINE : JUNE 26, 2000 ISSUE
NEWS: ANALYSIS & COMMENTARY

Gore: Two Chickens in Every Pot?
Gore ups the ante with more middle-class goodies

With Democrats edgy over his swoon in the polls, Vice-President Al Gore is making another stab at recasting his economic plan. On June 13, the Veep appeared before a partisan Manhattan crowd and rolled out his ''prosperity and progress'' agenda, a platter of appetizing--but sugary--confections meant to revive his campaign. There were new ''trust funds'' for education, the environment, and health care, a new Social Security investment account, and a plan to put Medicare into an inviolable ''lockbox'' where it would presumably be safe from grubby Republican hands.

After months spent fruitlessly practicing ''scareonomics''--the art of labeling every proposal from GOP rival George W. Bush as a ''risky scheme''--Gore is searching for an effective new message. Since the Veep is the guy saying that times are good, he can't call for big change. So he's trying to make do with an increasingly long list of mostly modest reforms.

Will an approach built on dozens of small middle-class goodies--vs. Bush's big tax cut and Social Security reform--work? A similar micro-brew did wonders for Bill Clinton in 1996. But although the current economic boom makes the public more tolerant of such spending boosts, it has also washed away Gore's advantage. A new Washington Post/ABC News poll found that Bush leads Gore on the issue of economic management by 46% to 41%.

WHAT COST SAVINGS? To regain momentum, Gore is trotting out some poll-tested ideas. Case in point: his new trust funds for education, health, and the environment. But like much of his agenda, there is less than meets the eye. The trust funds make it sound as if Gore is setting aside billions for popular priorities, but he won't say how he'll finance them. Unless he earmarks specific taxes, future lawmakers could slash the programs at will.

The new Medicare lockbox also has a catch. The idea: Medicare surpluses--which could hit $300 billion by 2010--would help erase the federal debt by 2013. The savings from unneeded interest payments would be credited to the Medicare account. But without Medicare reform, the program may have to supplement the current payroll taxes with income tax revenue after 2015.

Gore's most dramatic proposal is his call for a new tax-subsidized savings plan called Social Security Plus (SSP). Bush would cut payroll taxes by two percentage points and allow workers to use that money for private retirement accounts. Gore leaves the existing system intact and, instead, encourages workers to save on their own.

There are two problems, however. The first is that the current retirement system has only enough money to pay 70% of benefits after 2050. SSPs do nothing to fill that hole. The second is that SSPs use tax revenues to fund what are really extra benefits. Thus Gore's plan, like existing individual retirement accounts, would cost billions.

With budget surpluses rising to more than $4 trillion by the end of the decade, according to forthcoming estimates, Gore is betting that there will be enough dough to fund his growing wish list. Maybe he's right. But if the economy slumps, he'll be stuck with massive commitments he can't pay for--the sort of fiscal imprudence he claims to reject.

Right now, voters are too busy planning summer vacations to pore over either Goreonomics or Bush's alternative. When they do, Gore is betting that his approach will come off as less scary than his foe's. Meanwhile, he's offering billions to make friends and influence people. He figures he has nothing to lose.

By Howard Gleckman and Richard S. Dunham in Washington

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