Will new president be able to pay for promises?

WASHINGTON — The new projected record federal budget deficit of $482 billion will severely limit the next president's ability to cut taxes and pay for pet programs, yet Barack Obama and John McCain are offering few specific ways to deal with it.

"There's a huge missing issue on the campaign trail," said Robert Bixby, the executive director of the Concord Coalition, which advocates fiscal discipline.

The new president will take office four months into a fiscal year whose deficit is likely to shatter the current record of $413 billion, set in 2004, the White House said Monday.

McCain has pledged to balance the budget by 2013, while Obama has no timeline. Both candidates pledge to keep most taxes low while revamping the nation's health-care system and strengthening its military.

Obama would raise taxes on the wealthy but would leave many of President Bush's 2001 and 2003 tax cuts in place — reductions that will cost the government around $2.8 trillion in the next decade, according to last week's report from the Urban Institute-Brookings Institution Tax Policy Center, a joint project of the two center-left research centers.

McCain would maintain more of the tax cuts, at a price of about $4.2 trillion. His strategy for deficit reduction is to end earmarks, or congressionally mandated local projects, and to eliminate waste, fraud and abuse from federal spending.

"Obama has a variety of costly proposals, but McCain has a variety of proposals that are even more costly," said Richard Kogan, senior fellow at the Center on Budget and Policy Priorities, a liberal budget-research group.

Medicare is expected to run out of money by 2019 and Social Security's trust fund should be depleted by 2041, according to the programs' trustees. Bush has tried to limit the growth of Medicaid, the federal-state health care program for lower-income residents, but Congress is still debating that.

Obama would increase Social Security taxes on wealthier taxpayers — the tax now applies only to earnings up to $102,000 — saying that new taxes are the "first place to look for ways to strengthen" the system. He also vows to reduce waste in Medicare and "tackle fundamental health-care reform" to make it more efficient.

McCain is similarly vague, saying he wants to "modernize" the three systems but offering no details. This past weekend he said of Social Security, "everything is on the table."

Neither candidate specifically addresses how much savings his ideas could generate, particularly if the economy remains sluggish, which holds down federal revenues.

Key reasons for Monday's deficit revision were the economic slowdown and the stimulus checks sent to millions of taxpayers this year to help boost the economy.

The White House maintained that by one measure that economists value, the deficit still would be well below its modern historic peak in 1983, when it was about 6 percent of the gross domestic product, the value of one year's production of the nation's goods and services. The 2004 deficit was 3.6 percent of the GDP, and the revised 2009 number would be 3.3 percent of the GDP.

Even so, the fiscal 2009 deficit still would be huge, analysts said. "You have to assume an amazing economy to make a difference," Riedl said.

The McCain and Obama camps reacted to the worsening deficit news Monday by reiterating that their programs would trim the deficit, but specifics remained few.

Obama met with a team of top Democratic economic advisers, including former Federal Reserve Board Chairman Paul Volcker, Clinton administration Council of Economic Advisers Chairman Laura D'Andrea Tyson and five Clinton Cabinet members.

Also present were two Bush appointees, former Treasury Secretary Paul O'Neill and former Securities and Exchange Commission Chairman William Donaldson.

Financial experts are wary of Obama's spending plans. "The big question mark is health care," Bixby said.

After the meeting, former Sen. Bill Bradley, D-N.J., and Tyson wouldn't get specific about Obama's plans for deficit reduction. He calls for a new $50 billion economic-stimulus plan, then a longer-term deficit reduction.

Bradley called the economy a "constantly moving target," adding, "It's slightly misleading to say what it is at this moment because it might not be that in November."

McCain's campaign advisers briefed reporters by phone, saying that cutting taxes would induce consumers to spend and employers to create jobs and that revenue would flow into the Treasury. However, a host of economic studies, including by the Bush Treasury Department, conclude that tax cuts drive up federal budget deficits even if they stimulate the economy, unless they're matched by spending reductions.

"John McCain's policy is all around creating jobs," said Meg Whitman, former eBay president and a McCain adviser. "That is the number one priority for the tax policy, and all other policies are designed as to how do we really create good jobs for Americans going forward."

Raising taxes will simply drive up deficits further, said John Taylor, a professor of economics at Stanford University and a McCain backer.

Lower taxes and spending cuts will "reduce the budget deficit and bring it into balance by 2013," Taylor said, although the campaign hasn't specified spending reductions to offset the tax cuts.

Few analysts agreed. Kogan noted that McCain would expand the military while keeping the tax reductions intact.

He and the other experts agreed on this much: Voters are likely to hear few specifics about how to reduce the deficit because the choices would be too painful.

"Any candidate who permanently and out loud explains what he'll do to lower the long-term structural deficit," Kogan said, "is probably also known as a third-party candidate."