Jewish World Review Feb. 26, 2001 / 3 Adar 5761
Morton Kondracke
Bush should talk about long-term
budget challenges
http://www.jewishworldreview.com --
PRESIDENT BUSH'S speech to Congress surely will set
off a honeymoon-ending fight about taxes and spending. The
question is, will Bush tackle the long-run challenges to the
federal budget or just the immediate ones?
The battle ahead concerns the divvying up of an anticipated
10-year budget surplus of $5.6 trillion, especially the $3 trillion
non-Social Security surplus.
What hardly anybody is paying attention to is that, without
major reforms, all surpluses will disappear around 2019 and the
nation will head back into deep debt. This could happen even
sooner if politicians aren't careful.
The warning is being issued in graphic terms by Comptroller
General David Walker, who said in an interview, "The country is
experiencing something it never has before in its history, a
period of significant surpluses followed by a demographic tidal
wave that's going to swamp us."
The challenge caused by the retirement of the baby-boom
generation means that "we've got to pay much more attention
not just to whether we can afford something today but whether
we can sustain it tomorrow," argued Walker, head of the
Government Accounting Office, Congress' investigative arm.
Walker is taking no sides in the upcoming fight over whether
Bush's $1.6 trillion, 10-year tax cut is affordable or how big a
Medicare prescription drug benefit should be.
Instead, he's advocating caution in not over-spending estimated
surpluses - but even more, he's pressing for broad-gauge
debates about entitlement reform and about what Americans
want government to do and how much they are willing to pay
for it.
Last year, for instance, federal taxes accounted for 20.6
percent of gross domestic product, he said, the second-highest
level in history. The highest was 20.8 percent in 1944, at the
height of World War II.
However, without entitlement reform, taxes might have to rise
to European levels (40 or 50 percent of GDP) to pay retirement
and health care benefits for baby boomers while maintaining
such current government functions as defense, education and
law enforcement.
Even if Social Security surpluses are lock-boxed, by 2030 Social
Security, Medicare and Medicaid would consume three-quarters
of total federal revenues.
"Little room would be left for other federal spending programs,"
Walker recently testified to the Senate Budget Committee.
"Some time during the 2040s, government would do nothing but
mail checks to the elderly and their health care providers."
Law requires that retirement benefits automatically be cut as
Social Security and Medicare trust funds become depleted, but
Walker believes that political pressures will keep them up,
straining other programs.
"I believe it is important," Walker told the committee earlier this
month, "that Congress and the President look at budget choices
today in the context not only of today's needs and demands but
also of the long-term pressures we know loom on the horizon."
Chances are, though, that this won't happen. Bush called for
Social Security and Medicare reform during the campaign, but
these issues seemingly are being pushed down the road as he
tries to win his tax fight.
Later, Congress is likely to debate Medicare in the context of
how to provide a drug benefit, not how to restructure the
program.
GOP tax strategy seems to be to quickly mark up an
across-the-board rate-cut bill worth about $900 billion over 10
years in the House Ways and Means Committee and pass it in
early March.
The bill reportedly will hold down costs by only making
retroactive cuts for the lowest bracket of taxpayers, whose
rate would fall from 15 to 10 percent.
Other cuts, such as reductions in the marriage penalty and
inheritance taxes and expansion of retirement and health care
credits, would follow in one or more later bills.
House-passed tax bills would be reassembled into a package in
the Senate and debated as a reconciliation measure that
requires only 51 votes to pass.
Although some moderate Republicans are nervous about the size
of the tax package, even Democrats expect that Bush can
persuade them to follow his lead on a matter of such
make-or-break political importance.
Along with his tax proposal, Bush plans to unveil a fiscal 2002
budget that holds down overall spending to the rate of inflation
-about 4 percent - while increasing spending for education and
the National Institutes of Health.
Democrats will attack the spending plan, which will involve
below-inflation increases in many departments, on the grounds
that the tax plan requires "cuts" in spending. However, Bush can
claim that he is just being prudent by restraining spending to
ensure that surpluses actually develop.
Besides unveiling a 10-year plan, Bush ought to talk long term.
He ought to start the process of entitlement reform that his
predecessor, Bill Clinton, might have instituted but didn't.
He could borrow lines from the comptroller general: "Our
short-term prospects look better, but the long-term outlook
looks worse. Without change, demographics will overwhelm our
surplus and drive us back into escalating deficits and debt."
That could get people's attention and even keep Bush on
political high
ground.
JWR contributor Morton Kondracke is executive editor of Roll Call, the newspaper of Capitol Hill. Send your comments by clicking here.
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