Child's Play

The budget debate is deceiving Americans about the fiscal future.

Carolyn Lochhead from the February 1996 issue

In the clash between Congress and President Clinton over balancing the budget, all the crucial policy details and factual depth have been swept away by two "talking points" that each side is desperately trying to drill into the public consciousness: Republicans say they will save America's children, while Clinton claims that he will save America's values.

Neither plan does anything of the sort.

Even if the two sides agree on an honest seven-year plan before the 1996 election, it will represent at best only a modest step toward forestalling a problem that will leave American children and American values alike wrecked on the shoals of today's potent elderly voting bloc.

For all the hand-wringing, even the GOP plan leaves the country hurtling off a fiscal cliff around 2010--just eight years after the budget would supposedly be balanced. That's when the 76 million-strong baby boom generation begins to retire and sign up for benefits in the big entitlement programs that now drive the federal budget: Social Security, Medicare, Medicaid, and civil service and military retirement.

"Hitting a zero deficit in 2002 doesn't mean that beyond 2002 the deficit will be zero," says Laurence Kotlikoff, a Boston University economist. "The pain required to keep the deficit at zero is much, much bigger than anybody is talking about publicly."

But if Republicans are guilty of falsely painting their effort as salvation, they at least have taken the first vital step in the right direction. Playing by the conservative Congressional Budget Office rules that Clinton once advocated, they have proposed many very real and very significant changes in entitlement programs, including ending the entitlement to cash welfare benefits and block-granting Medicaid to the states.

They have walked through the political fire on Medicare, proposing to open the system to competition, introduce medical savings accounts, and most significant of all, cap its out-of-control spending growth. Following advice long urged by economists and long ago adopted by the private sector, the GOP plan "defines," or limits, the per-beneficiary payment, cutting off the blank-check approach for at least part of the vast Medicare program.

Democrats, led by President Clinton, have for their part stooped to a level of pandering that should make an honest person blush. Upon taking office, Clinton recognized that containing government health care spending was absolutely crucial to braking the deficit. Of course, Clinton proposed to put out the fire by dumping gasoline on it, calling for a government takeover of the private health care market and clamping down with price controls. But even Clinton proposed restraining Medicare spending, arguing cogently at the time that a slowdown of spending growth could not logically be construed as a cut.

Now, he accuses Republicans of planning "crippling cuts" in Medicare and Medicaid that are "bad for America." This can most kindly be described as a gross distortion. Per-beneficiary spending in both programs will continue to soar, which is exactly why the Republican plan falls so short of a fiscal rescue.

The administration has filled the air with glib half-truths and sound-bite discourse calculated to leave a false impression. It panders to the worst impulses of a public that often appears as ill-informed and prone to mood swings as a 13-year-old. (One CNN talk show flashed a "poll" during the partial government shutdown asking people to list themselves as "angry" or "not angry," as if their emotions were substitute for thought.)

People crave the abstraction of a balanced budget, but not its specifics. Even the well-informed have a hard time discerning the difference between Medicare (for the elderly) and Medicaid (for the poor), and wouldn't know what a block grant was unless one landed in their personal checking account. Most people seem to believe that budget deficits are driven by military spending, fraud and waste, and foreign aid, rather than the autopilot benefit checks going out to half the population.

If told the facts, however, voters seem quite capable of making rational decisions. Citizens--conservative and liberal alike--who participate in budget-balancing sessions run by the bipartisan Committee for a Responsible Federal Budget consistently produce a balanced budget in five years, two years faster than the Republican plan. They have no trouble cutting spending when they find out that interest on the debt--$257 billion--will this year surpass the entire defense budget.

One often hears the elderly claim that they "paid" for their Medicare benefits. Yet every one-earner couple who retires this year will receive a windfall of nearly $260,000 over their lifetime--more than a quarter of a million dollars--in Social Security and Medicare benefits above what they contributed in taxes for those programs, according to Eugene Steuerle of the Urban Institute.

Entitlement spending for the elderly and interest on the debt are rapidly crowding out everything else that politicians of all stripes say they want to protect: welfare, defense, crime fighting, education, scientific research, environmental protection, national parks, highways, courts, and every other federal function.

Crushing tax burdens are just over the horizon. When the baby boom generation retires, younger workers will have to pay 84 percent of their income to support federal spending, an obviously uncollectable amount. Even if the Republican balanced budget is enacted, that rate will fall only to the low 70s.

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