A Billion, Gajillion, Fafillion Dollars

Sometimes, reality doesn't mix well with hope.

WASHINGTON -- Barack Obama promises $4,000 credits to help pay college tuition. Hillary Rodham Clinton backs $25 billion for home heating subsidies. And John McCain wants to not only extend President Bush's tax cuts, but eliminate the alternative minimum tax at a cost of about $2 trillion over 10 years.

Then there's reality.

These campaign pledges — and dozens more in the manifestos of the leading presidential candidates — face a collision with the real world come January.

That's when the new president will start putting together a real budget and economic plan, one drafted against the backdrop of record federal deficits exceeding $400 billion. Even more challenging is the growth of the Medicare and Social Security retirement programs, which budget experts say could require wrenching benefit cuts, politically difficult tax hikes or both to handle the retirement of the baby boom generation.

In that environment, promises to effectively rebate the first $500 of Social Security payroll taxes (Obama), provide $1,000 tax credits for retirement savings (Clinton) or cut the corporate income tax by 10 percentage points (McCain) may turn out to be campaign fantasies.

"They're operating in Never Never Land.... None of them are honestly addressing the real challenges that they're going to be facing if they're elected," said Leon Panetta, former budget director and chief of staff for President Clinton. "We're facing a deficit bubble that is getting increasingly worse and at some point is going to explode on us."

...Obama's "Keeping America's Promise" manifesto is full of costly prescriptions for the economy. Obama proposes tax cuts for senior citizens and college students, and $500 for every wage-earner, totaling $80 billion-$85 billion a year. He says he would pay for the tax cuts by closing loopholes and closing offshore tax havens, but those steps would fall far short of fully offsetting their costs.

Both Obama and Clinton would keep in place many of the Bush tax cuts, including rate cuts for most taxpayers and the $1,000 per child tax credit. Both would let rate cuts for upper-income taxpayers expire, and use the savings to help pay for their health care promises.

To address looming shortfalls in Social Security, Obama supports raising the cap that limits the 6.2 percent Social Security payroll tax to the first $102,000 of income.

Almost in an aside, the Obama campaign document says he supports closing the "doughnut hole" in the Medicare drug benefit — the gap created at the point when beneficiaries have to pick up all of their drug costs before catastrophic drug coverage kicks it. Closing it would roughly double the cost of the Medicare prescription drug program, however, and Obama offers no way to pay for it.

Obama also promises a $60 billion investment in infrastructure and an $18 billion per year boost in education spending. The Illinois senator says his plan to withdraw U.S. forces from Iraq will generate savings to help pay for these items, but that doesn't qualify as an offset under budget rules because the Iraq spending is an emergency expense, not a permanent part of the budget.

In short, the candidates are making promises they can't keep.

Hey Obama worshippers! He is not going to be able to deliver the hope that he's selling!

Empty promises.

Monitor the Obama Spend-O-Meter.