Washington: Child's Play

The budget debate is deceiving Americans about the fiscal future.


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.

That tax level is untenable. So benefits will be slashed one way or the other, a big surprise for those counting on almost free medical care and a Social Security check to sustain them in retirement.

"It is hard to believe that responsible adults would leave this kind of mess for their children," Kotlikoff says. "People have to sit up and look at this tidal wave of baby boomers coming at us."

Which is why the current White House pandering is such a gross disservice. It robs the electorate of the facts on which to base rational choices. It is an especially devious argument to the poor and the lower middle class under whose banner it is made. Their entire net worths consist of bankrupt promises of future Social Security and Medicare/Medicaid benefits–worthless checks, in effect. Who will "protect" them when they retire, years after the 1996 election, when the debt is monetized and inflation eviscerates their living standards? Japanese bond buyers, maybe?

Clinton's veto of the stopgap spending bill on the grounds that it raised Medicare premiums was breathtaking. First he insisted that the elderly should pay a lower share of costs–25 percent rather than 31.5 percent–in a program that is structurally bankrupt and will begin going into the red this year. Democrats who created the program in 1965 set premiums at half of costs, itself a huge taxpayer subsidy. And Clinton himself had earlier proposed increasing premiums; the elderly would pay just $4.80 a month less under his plan by 2002 than Republicans propose.

Such tactics moved even the liberal Washington Post to blast Clinton and congressional Democrats for having "shamelessly used the [Medicare] issue, demagogued on it, because they think that's where the votes are and the way to derail the Republican proposals generally….If the Democrats play the Medicare card and win, they will have set back for years, for the worst of political reasons, the very cause of rational government in behalf of which they profess to be behaving. Politically, they will have helped to lock into place the enormous financial pressure that they themselves are the first to deplore on so many other federal programs."

In his brief televised veto message, Clinton repeated the words "balanced budget" or variations thereof 16 times. "We must balance the budget," Clinton said. "I proposed to Congress a balanced budget, but Congress refused to enact it."

Congress did refuse his budget–unanimously in the Senate, with not even California Democrat Barbara Boxer, related to the Clintons by marriage, in support. But Clinton never proposed any such thing as a balanced budget. His first official 1996 budget had the deficit rising to nearly $400 billion in 2004. In June he issued a 20-page press release that claimed to outline a balanced budget over 10 years. The CBO said it left deficits at $200 billion a year.

Democrats describe as a shop of horrors a Republican budget that will spend $12 trillion over the next seven years–$3 trillion more than over the past seven, including a $2,300 increase for every Medicare beneficiary.

White House Chief of Staff Leon Panetta well knows all these facts. He was a former chairman of the House Budget Committee and the director of the Office of Management and Budget who proposed similar entitlement restraints in the past. "The status quo is not acceptable morally," he said in 1992, "because it means that we will heap a larger and larger burden of debt on our children and their children and grandchildren." Yet now he stomps out of negotiating rooms in professed anger over GOP refusals to "protect" Medicare.

Panetta recently held a special "briefing" for regional reporters on a White House report titled "Impact of the Republican Budget Cuts on Children: A State-by-State Analysis." Such reports, tailored to generate regional news coverage, are frequently "unveiled" as part of a big public relations launch by top Clinton officials who suddenly become lavish in their attention to obscure reporters from the hinterlands.

Panetta declared that the dreaded GOP "cuts" will "expose children in [fill-in-the-blank-state] to hazardous waste," and "deny 236,900 children in California basic and advanced skills." If only the federal government were somehow endowing children with such skills.

The report, statistically specific down to the single-digit child in all 50 states, showed Republicans leaving no tender need unmolested. American children would be "forced to remain in poor and unsafe housing" and "go without basic housing needs"; disabled children would be forced into "institutions"; children will go without immunizations, without food even. The Republicans will "allow sewage to flow into waters where children in [Arizona to Wyoming, alphabetically] live and play" and "jeopardize the water that children in [fill-in-blank-state] drink," and expose children to "drugs and drug-related crimes," as if federal programs are protecting them now.

Even the weather, and its "impact" on children, made the list of GOP atrocities. Dastardly Republicans would deny "about 658 children in Nebraska protection from bad weather." Children in sunny, warm places are not immune. The GOP budget also "denies about 595 children in Florida protection from bad weather conditions." The vital aid referred to is the Low-Income Energy Assistance Program, created under the Carter administration in response to the government-induced energy "crisis." It now subsidizes air conditioning bills in the South. Panetta himself had once proposed slashing this relic.

But that was before his boss was running for reelection. Some day not too far away, those same children will wake up to an 84 percent tax rate, truly eviscerated "programs," including no money for courts and prisons and highways and defense and national parks, or a raging inflation that decimates their living standards and leaves their parents destitute. That's the price of Clinton's protection of them and "American values."

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