Thursday, September 07, 2000

Economists deride Gore's plan for 'rainy day' fund


Government can just print money, one says

By Amy Higgins
The Cincinnati Enquirer

        When Al Gore unveiled his economic plan Wednesday in Cleveland, one of the few additions to what he had previously promised was a federal “rainy day” fund of $300 billion — in case rosy projections about surpluses fail to materialize.

        Financial planners will tell you that every family should have such a emergency cash account. But area economists say that federal government budgets don't follow the same rules, and that the plan is more political maneuvering than sound fiscal policy.

        “It seems like a gimmick because there's no way he can bind himself against spending that in the future,” said Eric Fisher, assistant professor in economics at Ohio State University. Mr. Fisher was among 300 economists officially endorsing Republican nominee George W. Bush's economic plan in an ad in Wednesday's USA Today.

        Mr. Gore's decision to set aside about $300 billion in estimated revenue over the next decade in a Surplus Reserve Fund is a stark departure from his earlier plan, which would have used up the entire projected surplus on spending initiatives or tax cuts. It reflects fears that government projections of eye-popping surpluses — $4.4 trillion over the next decade — may fall short.

        “That's a very negative message to send to the American people,” said Rebecca Thacker, an associate professor of management at Ohio University, who also backs Mr. Bush's plan. “If they gave (the surplus) back to the taxpayers in tax cuts ... they wouldn't have to worry about a rainy day in the future.”

        Ms. Thacker said that economic statistics are showing no signs that the economy is slowing or that the projected surpluses will not be met.

        But projections are not an exact science, said George Vredeveld, director of the Center for Economic Education at the University of Cincinnati. He said that the strength and duration of our current economic boom was a surprise to economists — so a bust could be equally surprising.

        The 200-page Gore-Lieberman plan — called Prosperity for Amer ica's Families, and available at www.algore.com — likens the Surplus Reserve Fund to savings accounts of prudent families.

        “No matter how much one uses conservative forecasts and tries to plan ahead, one still faces the possibility of unexpected expenses,” the report says.

        But the federal government has better ways of coping with an economic downturn without a Surplus Reserve Fund, namely issuing public debt or raising taxes, Mr. Vredeveld said. Families have to have “rainy day funds” because they can't do either.

        The report doesn't detail how the $300 billion would be held.

        It does, however, outline the Gore-Lieberman ticket's economic goals, including:

        • Pay off the country's publicly held debt by 2012.

        • Double the number of families with savings of more than $50,000, from one-third of the country's families to two-thirds.

        • Raise family incomes by one-third.

        • Increase homeownership from its level of about 67 percent to 70 percent.

        • Reduce the number of people in poverty from 12.7 percent to below 10 percent of Americans.

        • Cut the gap between what men and women earn by 50 percent.

        No matter what the economists say, given the public's skepticism about the very existence of a large surplus, Mr. Gore's “reserve fund” is politically wise, according to Andrew Kohut, an independent pollster.

        “People are wary that whatever money the government has it will squander,” explained Mr. Kohut, head of the Pew Research Center.

       The Washington Post contributed to this report.
       

Daughter stands in for Gore
- Economists deride Gore's plan for 'rainy day' fund



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