running without funds, the leaders of both parties of Congress arespending less and less time searching for a compromise to balance thebudget, and more and more time deciding how to use it to theiradvantage on the campaign trail. Meanwhile money is easily borrowed topay for government overhead. In an attempt to change this, on June 29,Congress voted in favor of HConRes67 that called for a 7 year plan tobalance the Federal Budget by the year 2002 (Hager 1899). This wouldbe done by incorporating $894 billion in spending cuts by 2002, with aprojected 7 year tax cut of $245 billion. If this plan wereimplemented, in the year 2002, the U. S.
Government would have thefirst balanced budget since 1969. There is doubt by citizens that a balanced budget will becomereality. A recent Gallop Poll from January, 1996 showed the budget asthe #1 concern among taxpayers, but 4/5 of those interviewed said theydoubt the GOP will do the job (Holding 14). Meanwhile, an ABC pollfrom November reported that over 70% of those polled disapprove of thecurrent performance by Congress, and most blamed politicians forfailure to take action (Cloud 3709). These accusations of failure tofollow through come with historical proof that Congress and Clintonhave failed to compromise and resolve the issue. After all, currentbudget plans are dependent on somewhat unrealistic predictions ofavoiding such catastrophes as recession, national disasters, etc.
, andinclude minor loopholes. History has shown that every budget agreementthat has failed was too lax. One might remember theGramm-Rudman-Hollings bill that attempted to balance the budget, butleft too many exemptions, and was finally abandoned in 1990(Weinberger 33). So after a pain-staking trial for GOP Republicans to create,promote, and pass their budget, as promised on campaign trail 94,Clinton rejected the very bill he demanded.
This essentially broughtthe federal budget back to square one. Clinton thought such a demandon Republicans to produce a budget would produce inner-party quarrelsand cause the GOP to implode. Instead, they produced a fiscal budgetthat passed both houses of Congress, only to be stalemated by astubborn Democratic President Clinton. Meanwhile, Clinton bounced backwith a CBO scored plan with lighter, less risky cuts to politicallysensitive areas like entitlements. Clinton’s plan also saved dollarsfor education and did not include a tax increase, but most cuts wouldnot take effect until he is out of office, in the year 2001. AlthoughClinton is sometimes criticized for producing a stalemate in budgettalks, the White House points out that the debt has gone down sinceClinton took office, with unemployment also falling.
Republicans arequick to state that Clinton originally increased taxes in 1993 and cutdefense programs, but his overall plan was for an increasing budgetwithout deficit reduction. Startling Facts about the budget:As of 1996, the national debt was at an all time high of $5trillion dollars, with interest running at a whopping $250 billion peryear (Rau M-1). This equals out to an individual responsibility ofmore than $50,000 per taxpayer. Nearly 90% of that debt hasaccumulated since 1970, and between 1980 and 1995, the debt grew by500%. Currently, the debt grows by more than $10,000 per second (RauM-l), and at current rates, a baby born in 1992 will pay 71% of his orher income in net taxes.
At current rates, our government is about toreach its breaking point. If that’s not enough to scare a taxpayer, by2002, 60% of government spending will be for entitlements, and by2012, these programs are projected to take up all government revenue(Dentzer 32). Not only economic development, but also family income ishurt by debt. With the cost of living going up, it becomes harder tofind a job. According to the Concord Coalition, real wages peaked in1973 and have gone down ever since. If the economy grew as fast as itdid in 1950, without a debt, the median family income would be$50,000, compared to the present median of $35,000 (Rau M-1).
As of current fiscal year’s budget, the United States governmentspends $1. 64 trillion yearly. $500 billion of that, or 1/3 of thetotal, is for discretionary spending (Rau M-1). This discretionaryspending is the target for most cuts, and seems to be the easiest tomake cuts in. Overall, the difference between the two parties budgetplans is only $400 billion.
This could easily be trimmed byeliminating tax cuts and adjusting the consumer price index toreality. Democrats say the GOP plan is too lopsided, and Republicanscriticize the Democrat plan for being unrealistic. A study by theUrban Institute shows GOP cuts will be felt mainly by the bottom 1/5of U. S. population. This should be more equally spread out acrossincome brackets (Hosansky 1449).
The GOP plan:By fulfilling campaign promises made by freshman RepublicanCongressmen to cut government spending, the GOP managed to pass a $1. 6trillion budget resolution by a party-line vote, in both houses ofCongress (Hosansky 1450). This budget called for major cuts ineducation, environmental programs, discretionary spending, and thelargest of all: entitlements. 70% of the money to balance the budgetunder the GOP plan would have come from entitlements.
This is becauseentitlement programs currently take up $301 billion a year. Such cutshad already been partially implemented with the GOP cutting overallspending by 9. 1% in 1996 alone. First, in an attempt to stop the projected bankruptcy ofMedicare in 2002, Republicans cut $270 billion overall from theprogram, with hospital reimbursement cuts being the deepest (Hager1283). Although stabilizing the fund is only expected to cost$130-$150 billion over 7 years, the GOP budget would reform theprogram to run better, and cheaper, by allowing it to grow at 6%yearly, instead of the current 10%. While both parties agree onpremium hikes for beneficiaries, this is a touchy subject for the 38.
1Million elderly voters on Medicare in 1996 (Rubin 1221). Medicaid,another volatile program, would be cut $182 billion under the GOPproposal. This would entail placing a cap on the program’s spending,and passing control of it to the individual state governments. For anestimated 39 million low-income people on Medicaid in 1996, the GOPplan cuts the program far more than Clinton’s proposed $98 billioncut. Social Security is another program being cut. The government has already reduced the outlay for seniors 70 andyounger who are on the program, but Republicans want more byincreasing the eligibility for Social Security from 62 to 65 for earlyretirement, and 65 to 70 for standard retirement (Henderson 60).
Smaller cuts included $11 billion in student loan reductions, $9. 3billion in labor cuts, $10 billion eliminated from public housingprograms, and several other numerous disaster relief programs cut(Rubin 1222). The GOP also wants to eliminate programs initiated byClinton like the National Service initiative, summer jobs, Goals 2000,and Americorps. Also, by terminating unnecessary farm programs, andcutting others by $12. 3 billion, Republicans hope to cut the yearly $6billion that the Federal Government spends on direct subsidies tofarmers.
Agricultural policies were also reformed and embedded intobudget-reconciliation bills (Hosansky 3730). Clinton’s Budget:Clinton’s budget only surfaced after he vetoed the budget passedby Congress, and included shallower cuts, with little or no reform toentitlements. This plan was supported by most Democrats and was usedas an alternate to a gutsy GOP budget. Clinton repeatedly trashed theRepublican’s efforts to make cuts on programs he feels important likestudent loans, agricultural programs, and entitlements.
He accusedRepublicans of wanting to kill some all together. He has alsothreatened to veto a Republican plan to reform Medicare called MedicalSavings Accounts, unless his programs are left intact (Hager 752). Under Federal law, the President is required to submit budget requestsin 2 forms: Budget Authority (BA), the amount of new federalcommitments for each fiscal year, and Outlays, the amount actuallyspent in the fiscal year (Rubin 1221). The plan that Clinton haspresented is not only a budget resolution in the form of a campaigndocument, but also proof of how far the Republicans have moved him tocompromise since the they took control of Congress. Most important, itdoes not readily translate into regular accounting principles used forgovernment programming. This year’s White House budget was a 2,196 page document thatthe GOP struck down immediately for not cutting taxes enough andneglecting to downsize the government (Hagar 752).
“There is little orno change at all in this budget,” said Pete Domenici (Senate BudgetCommittee Chairman), talking of Clinton’s new budget. Among largestcuts within Clinton’s plan was the downsizing of 1/5 to 1/3 of allprograms that he felt were not a priority to present day government. In addition, he wanted to close loopholes presented to corporatetaxation, that would save an estimated $28 billion. He vowed to keepprograms like education, crime prevention, and research orenvironmental grants, while increasing the Pell Grant from $2,340 to$2,700. Attention was also placed on discretionary spending, withClinton cutting a smaller $297 billion compared to GOP’s $394 billioncut. According to the Office of Management and Budget, thePresident’s plan cuts middle-income taxes by $107.
5 billion in 7years, small business by $7 billion, and cuts $3. 4 billion fromdistressed urban and rural area relief (Rubin 1222). This was to bepaid for by a $54. 3 billion hike in corporate and wealthy-incometaxes, and also in $2. 3 billion of tighter EITC (Earned Income TaxCredit) adjustments.
Although Clinton’s plan was expected to cut awhopping $593 billion in 7 years to furthermore produce an $8 billionsurplus in 2002, most cuts are long term without a clear goal. Clinton is sometimes criticized by Republicans for unwillingnessto compromise. He has used vetoes and stubborn negotiations to protectpersonal priorities like education, job training, and environmentalprograms, but Republicans have also tried using domination to forcehim to comply. GOP Presidential candidate Bob Dole said if Clinton wasserious about the budget, “we probably could have had an agreement onNew Years Day,” 1996 (Hosansky 1449).
“The President is sitting on hishands while the federal debt keeps going up and up and up into thestratosphere,” said Congressman Jesse Helms, Rep -North Carolina. Butone must remember that President Clinton does have somewhat of anoverwhelming power in this debate that Republicans can do nothingabout. He is the single person that can veto laws sent to him, andalso has the power to call Congress back into session if he is unhappywith the current situation. This was President Truman’s “ace in thehole” back in 1948. A Neutral Proposal:As a neutral proposal, a group calling themselves the “BlueDog’s” have won support for their budget from both Republicans andDemocrats. The group also known as the Concord Coalition includes manyconservative Democrats that want to see shallower budget cuts withless reform to entitlements.
They also believe a tax cut should bedelayed until the budget is balanced. The Coalition believes that byreforming entitlement policy, rethinking government size, changingtaxation methods, and consuming less, our budget can be balanced (RauM-1). Defending Deficits:In defense of deficits, some may argue that the danger of thecurrent situation is highly over rated. A budget deal has always hadless to do with economics than with politics and morality. Budgetdeficits don’t crowd out private investment, government spending does,and a large surplus may not be a sign of strength for a country.
Somesay it is impossible for every country to run either a surplus or adeficit. What matters is that a country can service its debts (Defense68). During most of the 19th century, the United States borrowed fromthe world (a current-account deficit). By 1870, it was running a tradesurplus, and by 1900 we had a current-account surplus. But in theearly 2Oth century, the U. S.
became the world’s largest net creditor,and by 1970 it peaked by finally running into deficit in 1970. Finally, 1980 brought a deficit so large, that the government was anet debtor again (Bottom Line 14). Current Reductions:One of the ways we are currently reducing the deficit includesthe introduction of “means testing. ” This means that people would getentitlements based on need. The government already has reduced SocialSecurity for modest income seniors age 70 and younger, but budgetcutters want to broaden that idea (Henderson 60).
There are 2 majorproblems with means testing. First, it is considered inherentlyunfair. Some might argue that a person might blow all of their incomebefore the entitlement reductions come into place. Second, it mightreduce the incentive to work and encourage people to hide theirincome.
For instance, beneficiaries of Social Security, ages 62-64,lose $1. 00 yearly in benefits for every $2. 00 they earn in income orwages above $8,160 per year (Henderson 60). Some say increasingeligibility requirements would solve some problems, and proposeraising the age of early retirement from 62 to 65, and standardretirement from 65 to 70.
Another touchy subject in budget reductionis the argument that the poor are being left out of savings. Accordingto the Clinton Administration, the GOP budget would cause a familywith income of $13,325 per year to lose 11% of their income (Whitman42). United States Treasury Department studies say the bottom 1/5income families would have net tax increase of an average $12 to $26under the GOP plan. The top 1/5 income families would receive morethan 60% of the tax relief.
A HHS analysis states that the GOP planwould also boost child poverty rates from 14. 5% to 16. 1%, and poorfamilies with children would loose 6% of their income. Conclusion:In the end, budget reduction is no easy task. “. .
. fixing theNational debt is like catching a train leaving the station. The longerwe wait, the harder and farther we have to run,” says the ConcordCoalition (Rau M-1). “Both parties want the issue,” instead of anagreement, said Representative Bill Orton.
The center of attention fordebate on budget cutting is politics, and whomever takesresponsibility for reform gets left wide open to criticism. AlthoughCongress and Clinton have spent the past year on debating the budgetand the size of the Federal Government, most plans fall back ongimmicks, loopholes, and long-term plans. Even Democrats now agree todownsize the government, but the two parties disagree on how andwhere. As we trust our elected officials to make decisions inWashington on our behalf, we must show interest and aptitude on theend results. To accomplish a balanced budget deal, many suggest thatwe must not only balance spending, but reform entitlements, rethinkgovernment size, change tax methods, and depend less on Washington. Attendees of a conference on budget cutting in Jackson Hole, Wyomingsuggested we deliver a budget that has a simple, quantifiable goal,that includes short term goals, and eliminated gimmicks.
Countrieslike Sweden and Canada have successfully reformed fiscal policies. Sweden’s government elected to abandon welfare, pensions, healthinsurance, unemployment programs, family assistance, and childallowances. Their deficit soon fell by 3. 5% of GDP in one year alone(Urresta 51). Sweden’s plan was three times as intense as Congress’current plan, while cutting spending in half the time.
As for cuts, everyone must suffer. As entitlement debatescontinue, “the interests of older Americans are being protected at theexpense of young people,” says Neil Howe and Bill Strauss (Rau M- 1). Older Americans have good reason to protect programs that they havepaid into for years, but those programs spend an overall per capitaamount of 11 times as much on elderly than that spent on childrenaltogether (Rau M-1). The youth are the future of America, and weshould protect them too.
Currently, poverty in US is 3 times as likelyto affect the very young than the very old. By balancing the budget,”interest rates come down, the economy picks up – we will rebound,”says Representative James Greenwood (Cloud 3709), and everyone shouldbe happy with that.
