Guts Check

Republicans control the nation's purse for the first time in 40 years. Do they have the courage to roll back federal spending?


Fresh from the victories of their first 100 days as Congress's new majority, Republicans stand on the brink of an epic clash over federal spending whose outcome will set the nation's economic course for years to come, and determine whether GOP dominance is lasting or brief.

Republicans are resolved to balance the budget by 2002, the supreme vow that undergirds their aim to shrink government and restore the nation's fiscal integrity. But like Pickett's troops before their suicidal charge at Gettysburg, they find themselves facing daunting and possibly overwhelming odds. Not since 1931 has the budget been balanced with any consistency. Doing so would change the course of 20th-century government.

At Gettysburg, a handful of the southern troops who charged the Union fusillade survived to reach the enemy line, only to fall at the spot historians now call the high watermark of the Confederacy. Republicans today declare this to be their historic moment, and speak bravely of courage, boldness, and the nation's salvation for unborn generations. Yet still a sense of dread is evident among even the most enthusiastic GOP troops. They know that this summer's struggle could mark the high point of their own war against the immense forces that have spawned the modern state.

Like many Republicans on Capitol Hill, Sen. Bill Frist, the Tennessee heart surgeon who came from nowhere to defeat Democrat Jim Sasser last November, said he will fight to the death. "I've been in medicine for the last 20 years," says Frist, sitting in his Capitol Hill office one afternoon in March, "and I'm going to be here for six or 12 years and leave the Senate after that. I have a finite time in which to accomplish my mission…and suffer whatever ramifications there are from a political standpoint."

Republicans know that they must scale back or end scores of programs that are just as popular with their own allies as with their foes. Business subsidies have to be slashed along with Democratic favorites like welfare and public television. And as a cold matter of arithmetic, Republicans must take on the huge middle-class welfare programs called entitlements.

They also know that to mess with middle-class welfare is to violate the first principle of American political survival. The last time they tried it, in 1986, it cost them the Senate.

Entitlements are programs that automatically pay benefits to anyone who asks and qualifies. The scariest one for Republicans is Medicare, the health care program for the elderly. Second only to Social Security in the pantheon of sacred cows, it is careening wildly out of control, its "trust fund" going into the red next year. Medicare will be the decisive battlefield in this year's budget war.

"The real problem is that the public wants to have its cake and eat it too," says a top Republican Senate aide. "These programs exist for a reason. There are well-organized and identifiable groups that benefit. A lot of people are getting more than they're putting in, and the elderly especially are getting a nice deal."

The political landscape right now, he says, "is very uncertain. Nobody knows where it's going."

Half of all Americans now receive some form of entitlement, whether Social Security, Medicare, Medicaid, Aid to Families with Dependent Children, unemployment insurance, veterans benefits, federal pensions, food stamps, school lunches, the earned-income tax credit, farm subsidies, or disability payments.

Entitlements consume more than half of the $1.5-trillion budget. They are driving the chronic $200-billion deficits, which will double to $421 billion by 2005. The General Accounting Office, the Congressional Budget Office, the Office of Management and Budget, and the Bipartisan Commission on Entitlements and Tax Reform have all charted the budget's calamitous current course and urged quick action.

Interest on the debt, at $203 billion, is now the third-largest item in the budget, consuming nearly as much as all domestic programs combined. Interest payments will overtake the entire defense budget in just five years. By 2012, entitlements and interest on the debt will consume all federal tax revenue, leaving no money for anything else: no Head Start, no national parks, no highways, no courts, no Pentagon.

Already, government borrowing is absorbing fully half of all U.S. savings, draining the economy of investment in the future productive capacity vital to higher living standards. Gargantuan government borrowing is already depressing the economy.

When the baby boom, now in middle age, begins to retire in just 15 years, entitlement costs will explode and the nation will find itself in financial crisis. Entitlements must be contained, not just to balance the budget, but to prevent a ruinous decline in living standards and a crushing tax burden on future generations.

Republicans, not entirely by design, are making it their crusade to avert this calamity. The keystone pledge of the Contract with America was the constitutional amendment to balance the budget. Republicans hoped it would give them the political cover to begin controlling a Great Society run amok.

But on March 2, when the amendment fell one vote short in the Senate, the GOP found itself out on a plank that had just been sawed off.

The amendment "would have brought the president to the table," said a rueful Pete Domenici, chairman of the Senate Budget Committee, just before the measure went down. "It would have brought many of the parties that are out there warring over their own money and their own programs to the table, because the will of the sovereign states and the people would say we can't continue what we're doing. That was the strength of it. Without that, it's going to be very, very difficult."

In the fight to pass the amendment, Republicans deeply committed themselves to balancing the budget without it. Any retreat now, they are convinced, would doom them. This is their moment, they contend. "There's a big risk in politics," says Rep. Bill Baker (R-Calif.). "The disaster awaits us if we don't take that risk."

But many fear that taking the plunge could doom them too. John Danforth, the retired Missouri Republican senator who co-chaired the entitlements commission, says tackling entitlements "could be political suicide. That's why they haven't been dealt with in the past."

The budget problem is fundamentally political. The government could continue to grow at 3 percent a year and still get to a balanced budget in seven years, because tax revenue climbs continually as the economy grows. The problem is that many programs are growing much faster than that. Medicare is expanding by more than 10 percent a year; it will cost $174 billion this year and balloon to $272 billion in five years. Along with Medicaid, the health program for the poor, Medicare is the root of the federal deficit and the chief obstacle to balancing the budget.

It also provides health care to 32 million elderly at bargain-basement prices. Current retirees are getting about $5.00 in benefits for every $1.00 they paid in payroll taxes, and the deal gets better every year. The Urban Institute's Eugene Steuerle estimates that the lifetime value of Medicare benefits for an average retiring couple will increase an astonishing $100,000 over the current decade: from $186,100 in 1990 to $278,600 by 2000.

The GOP is about to get a dose of bitter medicine, as the same health-industry groups that helped defeat President Clinton's government takeover of health care—a defeat that helped sweep the GOP to a landslide in November—now wage all-out war to prevent any federal retreat from health care.

The American Association of Retired Persons is already gunning for the GOP. Industry groups are preparing versions of "Harry and Louise" ads to attack Medicare and Medicaid changes. Even the GOP governors are working overtime to preserve their Medicaid money. Washington policy analysts are already wondering out loud if health care will turn out to be Bill Clinton's ticket to re-election after all.

"To make this big change in spending and taxing is going to be extremely difficult," says the GOP aide, "and I don't think even the members are all fully aware of how difficult it will be—although they are starting to get an idea—nor is the public aware."

The one big success Democrats scored in the GOP's first 100 days was to stop the Balanced Budget Amendment, and they did it by claiming the measure would "plunder" the Social Security "trust fund," blithely ignoring the fact that the so-called trust fund is being "plundered" now. The argument was completely disingenuous, but it worked.

Rolling back government is much easier in the abstract than in its specifics, not only for politicians, but also for the public. Politicians' hypocrisy often simply mirrors the public's. Republicans rightly decry the willingness of liberals to finance their compassion with other people's money. But conservative voters also prefer to cut other people's programs while saving theirs, like farmers who bank hundreds of thousands of dollars in crop subsidies while denouncing welfare mothers.

Sen. Richard Lugar, a Republican running for president, has demonstrated that political courage does exist, offering a plan to phase out the farm subsidies that go to his own Indiana constituents. But sitting right next to him as he testified to the Senate Budget Committee in February was North Dakota Democrat Kent Conrad, fresh from killing the Balanced Budget Amendment. Conrad had been arguing that Congress can balance the budget without an amendment, but that day he was busy insisting that farm subsidies have to be off the table.

Conrad has a big Republican friend over in the House, where Kansan Pat Roberts has been holding Agriculture Committee field hearings that seem designed to undermine Lugar. The witness lists read like a subsidy pep rally: Mr. Don Crane, Ford County Wheat Growers; Mr. Larry Kepley, Farm Credit System; Mr. Otis Molz, Farmland Industries; Mr. Larry Williams, Kansas Bankers Association; Mr. Rod Lenz, Colorado Potato Administrative Committee; Mr. Dave Carter, Rocky Mountain Farmers Union, and on and on in an endless parade indistinguishable from the ones former Democratic chairman Kika de la Garza used to run.

The spectacle that raged over the $16-billion package of spending cuts in this year's budget, known as rescissions, offered another telling portent. The cuts unleashed howls of protest from Democrats who portrayed each trim as a mean-spirited attack on the poor to pay for tax cuts for the rich. Yet they totalled a mere 1 percent of the $1.5-trillion federal budget.

California Republican Jerry Lewis, chairman of the House Appropriations subcommittee that came up with $9.5 billion of the House package, emerged from the exercise furious at his own colleagues. "There are significant chinks in our armor as we go to battle at serious budget time," Lewis warns. "Unless we are willing to regroup and rethink, then we are absolutely whistling in the proverbial wind."

Lewis points to the $206-million reduction he proposed for the behemoth $38-billion veterans program. Knowing that the notoriously ill-managed veterans hospitals are nonetheless "sensitive and controversial," Lewis says he decided to preserve spending levels at the level requested by President Clinton, plus a House add on. He said he sought only to eliminate more money that had been added by the Senate for six ambulatory care facilities. President Clinton immediately excoriated this half-a-percent trim that left spending higher than his own request as an ugly assault on veterans.

Then when cutting time arrived, Lewis says, Bob Stump (R-Ariz.), the chairman of the Veterans Affairs Committee, and Gerry Solomon (R-N.Y.), chairman of the Rules Committee, led the retreat, saying they wanted to restore the money before the Democrats did.

"When you got right down to it, they weren't even willing to take that step," Lewis says. "People say, 'Cut spending, but make sure government fills the pothole in front of my house.' When people who are the biggest of budget cutters have programs that they're emotionally involved in—even though they are huge programs—there's not a dime of it that can afford to be considered."

If such timidity, Lewis says, "is a reflection of the real intestinal fortitude" in both parties, "then there are real problems in the House of Representatives before you even get to the Senate."

The Senate, of course, is led by Bob Dole, the new media darling now viewed by liberals as the pillar of moderation who will turn back the House barbarians. In a New York Times profile, the Senate Republican leader and number-one contender for the GOP presidential nomination said his message would be, "reining in government and all that other stuff."

Dole often sounds eerily reminiscent of George Bush, resorting to Bushisms when trying to articulate the GOP message of smaller government and other elements of "the vision thing." His lieutenants who chair the big committees—Mark Hatfield, Robert Packwood, Nancy Kassebaum, John Chafee, Larry Pressler, William Roth, and Arlen Specter—are cool if not hostile to a major rollback in the federal government.

But even the staunchest Senate conservatives have tasted the joys of the status quo. "This is going to be very tough politics for these guys for the first time," says a Democratic committee aide. "They've always had it easy going around saying the government's the problem, and yet when it comes down to brass tacks, those guys are parochial politicians just like everybody else up here."

He recalls an episode in the transportation committee when the administration laid out plans to cut Amtrak. Mississippi's Trent Lott, the GOP whip who won the job on the strength of his conservative credentials, "all of a sudden discovered that there was an Amtrak line going from Chicago to New Orleans, and guess where it went through," the aide recalls. "All of a sudden he said, 'Well now, you guys have to work with us. You're springing this on us,' and he was back pedaling like mad. All these years conservatives, including Lott, have been saying, 'Amtrak, that's socialism.' So it's going to be tough going for them."

One little corner to watch this summer, the Democrat suggests, is LIHEAP, the low-income energy assistance program, a relic of Jimmy Carter's disastrous reaction to the "energy crisis" of the 1970s. LIHEAP pays the utility bills of an extravagant number of New Hampshire residents who will vote in the bellwether GOP presidential primary.

"We're going to watch what Mr. Gramm and Mr. Dole and Mr. Specter have to say about LIHEAP," the aide says. He says he knows what New Hampshire Republican Judd Gregg will say, "because we went through this last year," when the administration proposed reducing LIHEAP. "Judd Gregg and Trent Lott said, 'Oh no, no, no, you can't cut LIHEAP.' LIHEAP also goes for air conditioning in Mississippi, and they said, 'Oh, no, no, no, you can't do that. This is an important public program.'"

Rolling his eyes at the mention of LIHEAP, a GOP staffer acknowledges the inconsistency. "The word courage is a political cliché," he says, "but courage is really what they need right now."

Even the 73 vaunted GOP House freshmen at the vanguard of the revolution understand the value of pork. The day after the $189-billion tax cut in the Contract with America passed the House, Andrea Seastrand, a grass-roots conservative from California's central coast, faxed dual press releases: "Seastrand Praises Middle Class Tax Relief Bill," and "Niblick Bridge Survives: Seastrand Fights to Keep Money for Paso Robles Bridge Expansion."

That little bridge happens to be the same one that sparked a citizens' rebellion when the Paso Robles city council first proposed paying for it years ago through a colossal tax on local property owners. So the city council turned to Congress, which stuck the tab with federal taxpayers, in Iowa and other far-flung places, who will never cross the Niblick Bridge.

Such are the homely illustrations of the great forces that built the New Deal, the Great Society, and other 20th-century versions of socialist democracy. They will not die easily.

UCLA economist William Allen, now retired, often made the point that socialism leads to two things: poverty and tyranny. The extent will vary depending upon how far the experiment is tried, he said, but the direction always holds. Yet while the invisible hand of the market produces a better if not perfect outcome, Allen noted that free markets lose in the political arena, precisely because the invisible hand is invisible.

The hand of government, by contrast, is nothing if not visible. Its actions are advertised by every politician. Advocating a hands-off policy seems a hard-hearted excuse to do nothing about grievous social problems. That government usually creates further problems while failing to solve the first one matters less than that it tries.

Then there is the modern secular theology of compassion, which trades in Mother Teresa's philosophy for Ted Kennedy's. While the old Catholic nun labors in the slums of Calcutta, the U.S. senator ministers to the poor from the marbled Senate offices of the Russell Building without ever getting his hands dirty.

Senatorial compassion conveys a sense of spiritual well-being not only to those who exercise it, but to those who support it. Government good works offer more than the ostensible aid they lend to the needy; they also allow people to feel good about themselves by voting for the politician who donates tax money to good causes. Like market successes, however, the policy failures that result are often hidden within the larger milieu.

Still, despite such powerful forces, the outlook is hardly all bleak for the GOP agenda. The House's success with the Contract with America—a sweeping package of tax cuts, welfare reform, tort reform, regulatory reform, and congressional reform—was without legislative precedent in modern times. Nine out of the 10 items passed, defying earlier predictions among even its supporters.

Democrats were routed so thoroughly that 58 percent of them crossed party lines to vote for the very thing they had said they despised.

The shift in the political discourse and terms of debate has been extraordinary. Democrats seem in shock. At a welfare hearing, Democratic Representative Charles Rangel of New York was amazed that GOP witness Lawrence Mead of Princeton University urged recipients to find immediate work, even at the minimum wage.

"If you're a high school dropout, you don't just pick up The New York Times and find out what jobs are out there," Rangel remonstrated. "What should [that person] do, just hit the streets?"

"Yes, exactly," Mead responded.

An energetic and unapologetic conservatism has taken over the House, not only opening debate on matters long bottled up by the old leadership, but demonstrating their extraordinary popularity, even among Democrats.

The change could hardly be more profound. Rather than Chicago Democrat Dan Rostenkowski presiding over his Ways and Means Committee fiefdom, there sits Texas conservative Bill Archer, who not only vows to "pull the income tax up by its roots," but has people believing him.

The ideological division has crystallized and sharpened. The debates reflect real struggles over very different visions. "I have a simple message for the Democrats," Archer declared as he opened the tax-cut debate. "It is not your money. It is the taxpayers' money. It does not belong to the government. It belongs to the workers who earned it."

The '60s-style protests against the changes have generated scant interest. Few even noticed when Patricia Ireland, president of the National Organization of Women, got herself arrested in the Capitol Rotunda during debate on the Republican welfare bill.

Demonstrators bused in by the union-backed Philadelphia Unemployment Project tried to disrupt a welfare hearing but seemed more successful at undermining their supporters. "I do job training," shouted protester Leona Smith. "I teach job training. And there ain't no jobs." They were escorted outside, where they continued their protest on the steps mainly to reporters.

Democrats remain in a highly reactive mode. They protest every cut and defend every program, but suggest no alternative.

They offer only more job training programs that a large body of serious studies shows don't work. They reach for transparent hyperbole, comparing proposals to slow the growth of welfare spending to the Nazi Holocaust. Reductions, they said, will "savage" babies, kids, widows, pregnant women, and the elderly. Are puppies next, one has to wonder? The proposals they do offer often are variations on GOP themes, such as their insistence on workfare.

Florida Democrat Sam Gibbons, a Great Society architect, finally grew apoplectic, screaming on the House floor, "You all sit down and shut up! Sit down and shut up!"

Republicans have a potent budget weapon in hand, if they choose to use it. If the House refuses to fund a program, or cuts its spending, the matter can end there. The so-called zero-out option grows from the simple constitutional fact that both houses of Congress must approve money for the discretionary programs that Congress funds each year.

"It doesn't matter what the other chamber does, and it doesn't matter what the president does," says House Appropriations Committee Chairman Robert Livingston. "You can't veto a zero."

The power is as old as the Constitution, but Democrats spent their 40-year reign in the House creating programs, not killing them. House Republicans now promise to exercise this enormous power of the purse to roll government back.

House Appropriations Chairman Lewis warns of the danger of timidity. If the GOP fails to balance the budget but manages through small cuts to anger a passel of constituencies, he says, "We could be laying the seeds of a political disaster."

California's Chris Cox, a member of the House leadership, is certain that Republicans learned from the Reagan administration's budget battles, which ultimately succeeded in eliminating just four programs and left federal spending higher than ever. "Nobody likes taking all of the heat for cutting food stamps when in fact, they are still increasing," Cox says. "If somebody is going to be criticized for spending less on food stamps, then by God, we ought to spend less on food stamps."

There is, he said, "a political calculus at work. What will dawn on every living soul in the Republican Party is that it makes no sense whatsoever to take heat for cutting spending while failing actually to do it. The irony is that the viciousness of the attacks from the left in the face of modest trimming of spending growth will in the end virtually require trenchant cuts."

The Senate GOP aide believes his party is riding a long-term rightward shift in the country. Ronald Reagan ultimately lost his budget wars, but he was at the leading edge of that shift, this strategist argues. Still, he concedes, much political residue lingers from 40 years of Democratic control.

"We are talking about huge changes, and big changes like this just don't happen overnight," he said. "Rome wasn't burned in a day." Republicans may, he says, have to regain the White House and consolidate their hold on Congress before they can fundamentally alter the direction of government.

GOP strategists are urging boldness. In a memorandum, Jeff Eisenach, a close adviser to House Speaker Newt Gingrich, said the public first must be convinced that change is vital. Eisenach recommended a "burning platform" message, borrowed from the true story of a man on a burning North Sea oil rig. He jumped hundreds of feet into a freezing ocean littered with burning debris because he knew he would die if he didn't.

In his Senate office, Frist turns to a group photograph that hangs on the wall. "These are people I transplanted back two years ago," the former surgeon says. "All these people have heart transplants or lung transplants. That little baby was five days old when I transplanted him. Then some of these people here are as old as 65." He turns back from the photograph and says, "So to give that up, I need to make sure that we accomplish certain things, and if not, I shouldn't be here."

Even Frank Riggs, a political straddler from California's north coast, a district divided between those who want to cut trees and those who want to hug them, voices stoic commitment. Defeated after his first term when Clinton won in 1992, he signed the Contract last September and regained his seat in November's GOP tide.

"I've gone through what I call a political near-death experience, and it's truly emboldened and liberated me," Riggs says. "There is life after Congress, and politics should never be the be all, end all. And I believe, to my core, what Henry Hyde [the Illinois Republican who chairs the House Judiciary Committee] told me when I first came back here: that in politics, there are things worth losing for."

The most important thing Republican budget cutters have on their side may be the budget's own naked reality. "My hope is that when the American people are faced with the reality of the problem, they're going to decide that this has to be done," says Danforth. "We need to go directly to the public and [discuss] what it is we are doing to our children and our grandchildren and to the future of the country. We are doing something terrible."

Danforth concedes that this argument has not resonated with the public before and that it may not resonate now. "But at least we have to raise the issue," he says. "If the issue is raised clearly to the American people, then in a democracy the people decide. And if the people decide we want ours now, take care of us and forget about our children, then at least that is a conscious decision."

Contributing Editor Carolyn Lochhead is Washington correspondent for the San Francisco Chronicle.