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CNN Crossfire

What Happened to the Budget Surplus?

Aired August 21, 2001 - 19:30   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
TUCKER CARLSON, CO-HOST: Tonight, the incredible shrinking budget surplus. What happened to it? Did Bush give it away in tax cuts or did Democrats spend it?

ANNOUNCER: Live from Washington, CROSSFIRE. On the left, Bill Press. On the right, Tucker Carlson. In the crossfire, Democratic congressman Robert Wexler of Florida. And in Kansas City, Missouri, Republican Senator Kit Bond, member of the budget committee.

CARLSON: Good evening. And welcome to CROSSFIRE. Whatever happened to the budget surplus? It's still there, but getting smaller. At $120 billion smaller this year, according to estimates. Who's to blame for the shrinking surplus? A shrinking economy, say Republicans. George W. Bush, say Democrats.

In an ad released today, the Democratic National Committee accuses the President of raiding Social Security and Medicare to pay for his tax cuts. Republicans call the charge ridiculous. The tax cut they way was medicine for an ailing economy. Bush himself responded to the attacks with defiance.

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: We cut the taxes. It was the right thing to do. It was the right thing to trust the people with the money. It was the right thing for our economy. And Congress now needs to understand that there are some new parameters.

(END VIDEO CLIP)

CARLSON: And unrepentant President, a newly energized Democratic Party, an issue that could determine who controls Congress after 2002. Sound like a beginning of a new campaign season? It is. 14 months out and the race has already begun -- Bill.

BILL PRESS, CO-HOST: Off to the races. Senator Bonn, last year, what President Bush was campaigning for office, he promised the moon. He said we could have this huge tax. There'd be more of than enough money left over to pay for defense spending and even missile defense and education. Everything we wanted, without touching Social Security and Medicare.

Senator, you've been busy hanging out with the President today. You probably missed seeing a great new television commercial that exposes the myth of President Bush's promise. Here it is, paid for by the Democratic National Committee. Please listen up.

(BEGIN VIDEO CLIP)

NARRATOR: George W. Bush is in Harry Truman's hometown and explaining his budget. And he's got a lot of explaining to do, because the Bush budget violates one of Harry Truman's basic principles, protecting our seniors. The Bush budget raids the Medicare trust fund. Now he's using gimmicks to hide a raid on Social Security. Harry Truman believed in plain speaking. Now do some plain speaking of your own. Call the White House and tell George Bush, "Stop raiding our Social Security and Medicare."

(END VIDEO CLIP)

PRESS: So I guess that was a promise made and a promise broken, wasn't it, senator?

SEN. KIT BOND (R-MO), BUDGET COMMITTEE: No, Bill, only a very liberal Democrat like you would replay a TV commercial like that, which only ran in a few markets to try to perpetrate that line of bull on the American public. And I speak in Harry Truman terms, that's a line of bull. What happened to the budget surplus? If you remember, the slogan of your team in the 1992 campaign, "It's the economy, stupid."

The economy has been in a downturn that started last fall. And right now, the tax cut that Democrats were vying to increase in rebates this year, is the best thing that we can do for our economy, to get it moving again.

PRESS: But wait a minute, senator, whether you blame it on the economy, whether you blame it on the tax cut, everybody agrees there's about $160 billion left. Most of that is Social Security surplus. $300 million has already been set aside for prescription drugs. So where is the money going to come from unless you raid Medicare and raid Social Security?

BOND: Well first of all, the best thing you can do for Social Security, for Medicare and everything else, is get this economy growing. Being able to continue to meet the obligations to our senior citizens for Social Security, Medicare, for defense and education, depends upon having the economy grow.

And we have, in future years, in the budget which we still project to have about a trillion dollar surplus left over after we put in $300 billion for prescriptions and Medicare and for increases in defense and education, that money is there in the future. Right now, we are -- we have lost about $43 billion from the projected surplus as a result of the economic downturn.

CARLSON: Now Mr. Wexler, welcome to CROSSFIRE. Welcome back.

REP. ROBERT WEXLER (D), FLORIDA: Thank you. CARLSON: You're upset about the tax cut. You've been upset about it for a long time. To your credit, you've had a pretty consistent position. You were on CROSSFIRE in February. We talked about the size of the tax cut. You said it ought to be smaller. And at that time, you had an idea for what would happen if the budget surplus turned out to be smaller than expected. Let me read what you said then.

"If in the years in the future, those surpluses go away, then you've got to cut it back. It, being the tax cut." Surpluses have turned out to be smaller than expected, and yet you don't hear Democrats suggesting that the tax cut be repealed, congressional Democrats. They just complain, but nobody that I know of, and certainly no group of Democrats on the Hill, is pushing for actually changing the tax cut.

WEXLER: Well, I think my advice in February was exactly correct. The tax cut that the President passed, we now know the jury's back, was too large. It was too large to support a $1.7 trillion tax cut and do the defense spending that the President wants, do the education spending that our children desperately need, without going into the Social Security and the Medicare trust funds.

We all should be able to agree at this point, Tucker, that the President's tax cut has caused us, along with the slowdown in the economy, to go into the Medicare trust fund account, the part that we call trust fund A, that pays for hospital costs, that's no longer sacrosanct. It's no longer in a lock box. The President needs to be accountable to the American people.

He promised he wouldn't go in.

CARLSON: Ah, the lock box? Well, let me ask you...

WEXLER: And he did.

CARLSON: OK, but as you know, this spot the DNC put out, accuses him of raiding the Social Security. As you know, not a single dollar went to pay for the tax that came from Social Security. But let me answer my question here. My theory is...

WEXLER: I...

CARLSON: ...hold on. My theory is the Democrats aren't pushing for repeal of the tax cut because a lot of them voted for it, 12 in the Senate, 28 in the House. And at least two Democratic senators, Tim Johnson and Max Baucus are running ads bragging about their support for the tax cut. So Democrats want it both ways.

They want credit for helping pass it. And they want to attack the President for the effects they claim it has caused.

WEXLER: I'm not here to protect anybody, no Democrat, no Republican. The bottom line was, President Bush's tax cut was too large. It was irresponsible. Unfortunately, we are now paying for it. We're paying for it out of the Medicare trust fund account. And we will be paying for it out of the Social Security trust fund.

You know, everybody says, "Oh, what a surprise, the economy had a downturn. We couldn't anticipate that." Well, that was the whole point. Everybody knew, every rational person knew, we couldn't just keep going up, up, up, and up. So you shouldn't have a tax cut that breaks the bank. The President did.

PRESS: Senator Bond, how about that? I mean, isn't that true? I mean, the tax cut, it's pretty now, was too big. It came too soon. And you guys spent the money before you knew how much money you had to spend.

BOND: Wait a minute, wait a minute. It's always interesting to hear liberal Democrats adopting a Herbert Hoover philosophy to deal with an economic downturn. Well, Herbert Hoover put...

PRESS: (UNINTELLIGIBLE) to...

BOND: Wait a minute, I'm talking. Herbert Hoover put us into a depression by raising taxes when we went into a recession. Now I trust that neither my friends on this program would say that we ought to go back and raise taxes when we have an economic downturn. If there's one time I've ever seen fiscal policy operating truly at the right time to be counter cyclical, and a lot economists agree, this is the time. And if anything, I'd say we should've had a bigger tax cut this year to get our economy moving again.

I'm very pleased that people are getting the rebates and they're spending them, because that's the best remedy for the slowdown we have in our economy.

PRESS: Well, we've been hearing this baloney, senator, for a long time that this tax cut was going to stimulate the economy. Where is it? I mean, the checks are out there and the economy is still sinking. It's just prove your theory is bogus.

BOND: Hey wait a minute. The checks are still going out. They come in this month. You know, it takes a little while for the economy to turn around. And the rebate checks are going out this money. We've already seen in some of the reports from the economists that there's been one to two-tenths of a percent increase already in economic activity based on consumer spending. And I think that's good news. We're seeing the beginnings of the impact to the tax cut. For me, I'd like to have seen a bigger tax cut.

WEXLER: Senator, I'll show you one of the impacts of the tax in my district. I got a great piece of mail today in my office. One of my constituents actually sent his tax cut back to me. It was a total of $5.35. And Mr. Bailant -- that's the gentleman's name and his wife, Geraldine -- they basically said the money ought to go to help pay for school supplies in Florida, because we desperately need them.

Or they ought to pay for teachers. Or they ought to pay for prescription drugs because seniors in Florida, and it can't be any different in Missouri, they don't have prescription drug coverage. And the saddest thing about this tax cut, because of the enormity of it, is that we can't now afford a prescription drug benefit. Can we?

BOND: Unless it's found.

CARLSON: OK, well I think senator, what you can't see is that this letter is written in crayon. But let me just ask you quickly here, congressman, a question. The tax cut is doing essentially what the President said it was going to do. The Republican argument was the tax cut will help impose fiscal discipline on a wild eyed Democrat spendthrift, such as you, but it would force them to make hard choices and make cuts in spending. And that's exactly what it's doing, is it not?

WEXLER: I have voted for balanced budgets. And yes, Democrats should be very careful with the way we spend money, but so should Republicans. The President, at the same time of this enormous tax cut, has got an enormous build up in the military, but no way to pay for it. He made big promises on education. No way to pay for it. How about the privatization plan for Social Security?

CARLSON: Well, wait a second, wait a second, congressman.

WEXLER: $900 billion in transition costs, where's it coming from, Tucker?

CARLSON: OK, let me ask you this. You've got lots of great ideas, obviously. Why don't you name three changes, three changes, to spending bills that you would make to save the federal government money to pay for this tax cut and right our economy?

WEXLER: I would take the $1.7 trillion tax cut, make it $800 billion, take the difference, put it and make a real prescription drug coverage plan under Medicare.

CARLSON: That's a spending idea, not a savings idea.

WEXLER: And do some real changes in education, which we desperately need and keep money aside for the rainy day. This economy's...

CARLSON: Those are all spending ideas.

WEXLER: ...that this economy doesn't -- no, no. You know, what's so interesting? I know the senator likes to say liberals, but what you conservatives always say is, "Oh, it's the peoples' money." It is, but it's the peoples' debt and it's the peoples' schools and the peoples' Medicare, too.

PRESS: Senator Bond, go ahead. I heard you want to jump in.

BOND: OK, if you all would take a break, let me get back in and breathe and just a minute.

PRESS: You're in. You're in.

BOND: Number one, it's not a $1.7 trillion tax bill, but I am really -- I'm amazed that my friend from Florida is proposing a $900 billion tax increase right in the middle of an economic downturn. As I said, that's Hoover era depression economics. And that's the worst thing we could do.

Frankly, we have built into the budget for the future years the money that is needed, $300 billion, to add to prescription drugs, to Medicare. I hope our friend from Florida will support something like the Bo Thomas bill, which will get prescription drugs. We are going to put additional money into education, which is within the budget we passed.

But I believe as President Bush and everybody else will tell you, the fact that we have spent more and more money on education without getting any improvement in test scores, indicates a fundamental reform is necessary. We need to add money, but we need reforms.

WEXLER: Senator, with all due respect, yes or no, are we now dipping into the Medicare trust fund account? Yes or no? We are, right?

BOND: Right now, depending on how much money we spend, the economic situation is going to put us in a position where we are in trouble meeting the needs right now. But if we try to raise taxes, we're going to fall even farther behind. And your precious programs would have to be cut even more to meet those needs.

PRESS: All right, gentlemen, I think that was a yes, all along. Yes, we're going to take a break. When we come back, Congress will soon be coming back to Washington with lots of things they want to spend money on. Will there be any money left to spend? More CROSSFIRE coming up.

(COMMERCIAL BREAK)

PRESS: Welcome back to CROSSFIRE. Looking ahead to next year's congressional races, both parties need a good issue. And both sides think they found one in the budget. If Congress does end up dipping into Social security, who gets the blame? President Bush or Republicans or congressional Democrats?

Kicking off the debate tonight, Republican Senator Kit Bond, senior senator from Missouri joining us from Kansas City and Democratic congressman, Robert Wexler of Florida.

Tucker?

CARLSON: Congressman, one of the few, one of the most gratifying aspects of this whole debate is getting to sit back and watch Democrats try out the lock box argument, mostly because it's just so pathetic. It didn't work, as you know, for Al Gore. It didn't work in the Virginia special election. Scaring senior citizens, using the Social Security's (INAUDIBLE) thanks to Republicans, it just doesn't work. Isn't it time to get a new scare tactic?

WEXLER: Tucker, it's not a scare tactic. And I appreciate the center of being fairly forthright earlier in the program in admitting that because of the large tax cut, combined with the slowness of the economy, President Bush violated one of his basic principles. He reiterated it many times in Florida.

He said he wouldn't touch Social Security and he wouldn't touch Medicare. We now know just a half year into his first term, he's into the Medicare trust fund account. And unfortunately, it probably won't be long when he's into Social Security.

CARLSON: Now let's, congressman, let's put this in perspective just a tiny bit here. This year the federal government will take in $158 billion more than it spends. This is an enormous chunk of change.

WEXLER: That's right, and...

CARLSON: But if you listen to Democrats, why is it makes us all go broke?

WEXLER: Why is that? Because there are thankfully surpluses in both Social Security and Medicare, but there are no longer, we're going to find tomorrow, surpluses in the rest of the government. And we need those surpluses in Medicare and Social Security to pay for the Baby Boomers generations' retirement. And we're not going to have it.

So what your part of the crowd's going to say is, "Aw, now you got to cut the benefits. Now we don't have any room for prescription drugs."

CARLSON: Well, that is a terrific idea.

WEXLER: And of that, my constituents find objection.

CARLSON: Well, let's hope it happens.

PRESS: Senator Bond, you were with the President today. He said something that I found absolutely astounding. You heard him say it once. Most of our viewers may not have yet. So I'd like you to listen to him say it again. If I could get your response. Here's President Bush today.

(BEGIN VIDEO CLIP)

BUSH: Despite the fact that this has been for a year, the federal budget will have the second largest surplus in history.

(END VIDEO CLIP)

PRESS: Now senator, you know that it started out in January as a $281 billion surplus. It is today, as Congressman Wexler just said, $158 billion. That means you've lost $123 billion over the last six months. And the President is bragging about it?

BOND: First of all, he is correct. The $158 or $160 billion surplus is going to be the second largest surplus on record. And I think that you have to get beyond the slogans that we've been hearing from my friend from Florida and look at what you need to do for the economy. One of the Democratic witnesses before our budget committee early in this month, in August, Robert Greenstein, a respected economist said that we ought to protect Social Security and Medicare, unless we're going into a recession or a war. And this frankly, is about as close as a recession as we want to get.

Two things we need to do at the government level. One, reducing interest rates, which I understand the Fed did a quarter of a point today, and giving tax breaks. We have an opportunity with our counter cyclical tax policy, which was strongly supported by many of my Democratic colleagues in the Senate. I don't know what was -- what the congressman from Florida was doing, but they supported it. And frankly, it's the right time.

And President Bush today heard from a lot of families who are spending that $600 refund to buy needed school supplies and take care of other needs for their family. I congratulate the President on his sound economic policy.

PRESS: But what I heard you say there, senator, was yes, it's OK to spend the Social Security surplus. Yes, it's OK to spend the Medicare surplus because the economy has tanked, but it's going to come back up next year. How can we believe that?

BOND: Well first, I quoted a respected Democratic economist.

PRESS: Whom you agree with, correct?

BOND: Who said, Robert Greenstein, who said yes, this is the time when we need, first of all, not to cut spending drastically, not to raise taxes. The arguments I've been hearing from the other side here tonight seem to indicate that some people want to have a $900 billion tax increase.

Just like Herbert Hoover did to take recession and put it into a depression. If we want to get out of it, we leave some money in the pockets of people who've been overtaxed, who are getting a refund or rebate, that'll help us get out of it.

WEXLER: But with all due respect, senator, nobody's talking about a $900 billion tax increase.

BOND: Mr. Wexler just said that. He said he'd cut the $1.7 trillion tax increase to $800...

WEXLER: At least for the most, senator, let's be honest with people. The great majority of this tax cut didn't come this year. It's going to come in the years out, seven years from now, eight years from now. That's no stimulus to the economy. Yes, people deserve to rebate this year. It should've been a $900 or $1,000 rebate, but the Republicans didn't even want to talk about that because that was too much to the middle class.

So if you want to talk about jump starting the economy, don't talk about reducing the income tax rates in the year 2008.

PRESS: OK. Well, we're unfortunately...

BOND: I'd like to have more of the increase upfront. Obviously, you don't like it at any time. I would like to see a total tax cut of over $1.35 trillion.

CARLSON: Now senator, we'd like to increase the length of the show, but sadly, we cannot. Thank you, senator, for joining us. Congressman Wexler, we appreciate it.

WEXLER: Thank you.

CARLSON: Bill Press and I will be back to get deep, deep into numbers, but even deeper into our opinions and closing comments. We'll be right back on CROSSFIRE.

(COMMERCIAL BREAK)

CARLSON: OK, Bill, fun fact. Do you know where the famous DNC is playing? It's playing in Washington, where we live, Waco, where Bush spends his summer, Ocean City, Maryland, where the punditocracy goes for the summer, and that's it. As if we needed more evidence that the Democrat Party is the chardonnay and cheese party, the elitist party, they take advertising only in the Hamptons and Palm Beach.

PRESS: Wait a minute.

CARLSON: Whoa, whoa, whoa. Anybody...

PRESS: I know Ocean City, Tucker. I grew up in Ocean City, Maryland. Anybody who calls Ocean City elitist has never been there.

CARLSON: But that's what everyone who summers. That's the whole point.

PRESS: I just want to say this. George Bush has no shame. In 1965, Lyndon Johnson signed the Medicare Act at the Harry Truman Library.

CARLSON: That's exactly right.

PRESS: The day George Bush went there to say, I'm going to steal from Medicare.

CARLSON: Yes, that's what he said.

PRESS: This guy ought to be ashamed of himself.

CARLSON: Oh, was the -- that was the first line of his speech.

PRESS: That's what he said, he was going to steal from Medicare.

CARLSON: Ladies and gentlemen, I'm planning to steal from Medicare.

(LAUGHTER) PRESS: And Kit...

CARLSON: It's so overheated. It's not even, it's not -- it's insane.

PRESS: Kit Bond agreed that that that's exactly what he's doing.

CARLSON: Right, I heard Kit Bond say that.

PRESS: From the left, I'm Bill Press. Good night from CROSSFIRE.

CARLSON: And from the right, I'm Tucker Carlson. Join us again tomorrow night for another edition of CROSSFIRE.

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