Out of change: how Bush squandered the money needed to reform government.

The 2% Solution: Fixing America's Problems in Ways Liberals and Conversation Can Love By Matthew Miller Public Affairs, $26.00

Karl Rove must be hard at work coming up with a slogan for Bush's reelection campaign. My current favorites are "Four more wars!" and "No new quagmires!" But there's one Bush slogan from 2000 that we are sure not to hear again in 2004: "Reformer with results"

Back then, the Bush campaign worked overtime to tout Bush's reform credentials. He promised to transform the education system, modernize Social Security and Medicare, and change the way Republicans treat the poor. Bush aides talked admiringly of Bill Clintons "Third Way," and promised a compassionate, conservative "Fourth Way" of their own.

Maybe they meant to say "fourth down," because whenever the future of reform is at stake, the Bush White House has punted. Instead of providing the muscle to make education reform work--more and better teachers, universal after-school programs and summer school in poor districts, and the resources not only to test students but also to help them succeed--all Bush has given the education system is an easy excuse to set the standards movement back decades. His new war on poverty turned out to be an IRS crackdown to make it tougher for the working poor to receive the Earned Income Tax Credit (EITC).

The real tragedy of this Bush presidency, however, is not just that he went soft on reform, but that he squandered the secret ingredient that makes bold reform possible: money. The reason that Third Way reforms have worked in the United States and Britain, and why the Fourth Way never made it out of Austin, is that Clinton and Blair understood from the outset that it costs more to change the system than to maintain the status quo. Without additional resources, bureaucracies always find a way around real reform, and politicians inevitably lose the nerve to support change. Put real money behind reforms that the public supports, and opposition from even the most entrenched bureaucracies and interest groups doesn't stand a chance.

Unfortunately, real money is what Bush has misplaced over the past three years. He turned a $5 trillion projected surplus into a $5 trillion projected deficit. With a trillion dollars in deficits in a single term, Bush has done what baseball owners do best--lose money.

Conservatives who used to rail against much smaller deficits now console themselves with the fantasy that the country will soon run so deep in the red that government will have to get smaller. In truth, the core functions of government are not the ones in danger. The more likely casualty of Bush's red ink will be any ambitious effort to reform those functions. For example, the only thing we know about Bush's Social Security plan is that it would require $1 trillion in transition costs. It would he a lot easier to find such a sum if the administration hadn't let $10 trillion slip through its fingers.

That reformer's lament--"Where has all the money gone?"--reverberates throughout Matthew Miller's new book, The 2% Solution. Miller, a Monthly contributing editor and former aide in Clinton's Office of Management and Budget, set out to write a book about how to fix America's problems by boosting government spending by 2 percent of the nation's Gross Domestic Product. By the time the book came out, the deficit was nearing 5 percent of GDP, a level that even the what-me-worry Bush White House considers the panic button.

It's a shame, because Miller has some interesting ideas for how to use that money. In the Third Way tradition, he offers a veritable Wal-Mart of "grand bargains" that address progressive ends through conservative means--tax credits for universal health care, a living wage of $9 an hour built on expansion of the EITC, public financing of campaigns through vouchers to every voter.

Miller's best idea, which parallels campaign proposals by Sen. John Edwards and Rep. Dick Gephardt, is a nationwide effort to put better teachers in the poor schools that need them most. The United States doesn't really have a teacher shortage; we have an urban teacher shortage. Urban districts go begging for teachers, while suburban districts, with higher salaries and fewer problems, have the pick of the litter. As Miller suggests, the federal government could correct that market failure by offering a salary hike to good teachers willing to teach in tough places.

Bush's education reform bill promised a quailed teacher in every classroom, but all the White House has done to help meet that goal is hold Fast Room events with the First Lady. Miller's plan would double the federal share of K-12 spending from 7 to 14 percent. Predictably, Bush's Education Secretary Rod Paige told Miller that he would prefer to do so without new money.

Some of Miller's grand bargains are less compelling. He desperately wants to launch a school-choice experiment which raises per-pupil spending by 20-30 percent, in return for offering all students vouchers. Miller doesn't seem troubled by the prospect of the federal government paving every child to leave the public schools and every teacher to stay there.

Miller prefers to say the tab for his ideas is just "two cents on the dollar," but 2 percent of GDP adds up to $220 billion a year in new spending. Everett Dirksen was right--"a billion here, a billion there," and pretty soon you're talking about real money. The grand promise of reform comes to earth when Miller explains where the two cents will come from: cuts in spending on health care, education, the poor, and if necessary, defense, and above all, a 60-cent-per-gallon gas tax. He does not say how he expects this to happen, when a solidly Democratic Congress was unable to pass a 5-cent-per-gallon gas tax in 1993, and got thrown out for trying.

Still, it's not Miller's fault that the country is going broke, and he's right that Washington's profligacy is no excuse for solving problems. When he was at the OMB, the government was making the hard choices to climb out of a budget mess much like we're in now. Clinton was investing in crucial reforms that made the medicine easier to swallow: expanding the EITC to make work pay, increasing child care to help mothers leave welfare, fueling the standards movement, and opening the doors of college by doubling federal spending on education. By contrast, the Bush administration has put the country in a hole and kept digging.

Over the next year, Bush will do all he can to avoid mentioning that he has neither reform nor results to show for his first term, and he will make a big show of promising Social Security reform in his second. The cry from every reformer, progressive and conservative alike, should be, "Show me the money?"

Bruce Reed, former domestic policy adviser to President Clinton, is president of the Democratic Leadership Council.