Shrinking surplus may paint Bush into a corner

Once upon a time, George W. Bush and his fellow Republicans must have looked forward to coming back to Washington after their summer recess. After all, Bill Clinton had demonstrated time and again that with the bully pulpit of the White House, Presidents can trump Congress in the budget endgame. And besides, the federal surplus would allow plenty of money for new initiatives-such as adding a prescription drug benefit to Medicare and revamping the military-and would still cover those tax-rebate checks. That was before the grim news from the Congressional Budget Office that the economic downturn and Bush's tax cut have shrunk the projected surplus for the current fiscal year to $153 billion. Now, the President's vow that Social Security reserves will not be tapped to fund other government programs looks like a fairy tale that may not have a happy ending for him or his party. "If the economy doesn't turn around, the major action taken by the President will have been judged to be a failure," said Stanford University economist John Cogan, who advised the Bush presidential campaign and is a member of the President's Social Security reform panel. "If the economy recovers, the administration will make the claim that the tax cut was an essential policy that turned the economy around. And they have a good case. The stakes are very high." Bush's image as a straight shooter is also at risk in the debate over the new fiscal realities. Democrats claim that he misled the public when he said the anticipated federal surpluses could pay for his venturesome tax cut without reducing domestic spending or dipping into Social Security reserves. "At best, it was gross mismanagement. And at worst, it was conscious deception," Democratic pollster Mark Mellman said. "There ought to be serious consequences." Republicans reply that it was the Democrats who pushed for the personal income tax rebate that has shrunk federal revenues by about $40 billion, and that even Democratic economists agree that in an economic downturn, the government shouldn't try to husband an enormous surplus. Some Republicans think that if the White House seizes the initiative and challenges congressional Democrats to help Bush trim domestic spending in order to avoid touching the Social Security reserves, that might at least keep Democrats on the defensive for a while. Nevertheless, a few in the President's camp are nervous that his vows not to tap into Social Security will harm his credibility. "The one thing the President had," said one Bush adviser, "was honesty: `I say what I mean, and I do what I say.' This is a significant chink in the armor." Another Bush strategist expressed doubt that the revised fiscal forecast has seriously damaged Bush's standing with the public, but he added, "This is not a road we want to go down too many times." As Bush departed Washington for a month of R&R at his ranch in Crawford, Texas, the White House was laying the groundwork for a fall domestic offensive on secondary issues--including adoption, teen pregnancy, school safety, youth gangs, and truancy--with solutions that emphasize the roles of character and local communities. Bush aides were reportedly considering a range of proposals, from teaching citizenship in schools to providing e-mail services to help grandchildren and grandparents stay in touch with each other. Such initiatives might lessen nagging problems Bush faces: the impression that he has been a conventional conservative Republican President who's mostly interested in serving corporate interests, and that he's a less-than-great communicator. His advisers note that Bush is always most compelling when discussing issues relating to his philosophy of compassionate conservatism. "That's what really animates him," said one. And Bush does better when speaking in informal settings, such as community centers or schoolyards, than when he's standing behind a lectern bearing a presidential seal. Even though Democrats don't fear Bush's oratorical skills the way they did Ronald Reagan's, they acknowledge that Bush can be effective in some circumstances, and that the White House is still the biggest megaphone in Washington. "I think we see when he's campaigning he does well and when he's governing, he does not do well," said Democratic pollster Fred Yang. "Our vulnerability is, he's got the ball and he can control the flow." But Democrats also think that the rising stakes in the budget battle will impede Bush's efforts to shift much of the political debate onto other terrain. "I think it's hard to talk about e-mailing your grandparents when you are also talking about spending their Social Security money," said Democratic pollster Mellman. Moreover, Democrats argue that if Bush pursues a minor-league agenda and the economy continues to sputter, he runs the risk of repeating the mistake his father made as President when he failed to aggressively attempt to reverse the economic slump of the early 1990s. "I think there is a perception that will grow around [George W. Bush] which basically says, `He is detached from the central issue of the economy, because he's not working on it. Therefore he's not the right person to be leading the country in the face of economic problems,' " said Democratic strategist Tad Devine, a partner in the Democratic media consulting firm of Shrum, Devine & Donilon Inc., who managed Democratic presidential nominee Al Gore's general election campaign. And while Republican strategists scoff at the notion that the public sees Bush as a lackadaisical leader, some worry about another GOP White House appearing to be indifferent to the economy. "My nightmare is what we did in `92--everything is fine, stay the course," said one GOP consultant who regularly advises the White House. "We tried that. And I don't want to go through that again. At some point, it's our economy and we need to have a plan and a program."