November 28, 2005 | Commentary on Federal Budget
When Congress returns from Thanksgiving recess, lawmakers will move forward on a long-term mandatory spending budget package. This is a fancy term for programs such as Medicare and Medicaid that grow automatically each year without any budget deliberation. This spending is set to explode as the baby boomers retire.
The House version of the package would save nearly $50 billion over five years, the Senate's $35 billion. Congress is right to try to rein in this spending, which threatens to dump huge debts on the backs of younger generations.
Critics assail these bills as immoral - as huge cuts in programs for the poor. But let's do the math. Spending on these types of programs is projected to grow by 39 percent over the next five years. The cuts in the House bill would reduce that growth to 38 percent, hardly slashing the budget. Fifty billion comes to one-half of 1 percent of the $7.8 trillion the federal government will spend during that period. This is like a family earning $50,000 a year trimming their spending by $250.
This is the scope of the dilemma confronting Congress as House and Senate lawmakers prepare to hammer out their differences.
Lost in all this hyperbole are two larger issues. Federal spending has increased by one-third since 2001 - few people saw this kind of growth in their paychecks. Less than half of that went to the war on terror. Instead, spending across the board saw large increases, including many anti-poverty programs. More important, these mandatory spending programs contain huge unfunded obligations that Congress has no plan to pay for. The federal debt of $4.7 trillion balloons to $46 trillion when these bills are added on, numbers beyond comprehension.
If the family making $50,000 a year imitated the federal government, it would spend $57,000 a year on all manner of things, with a credit-card debt of $1 million from this excess spending and commitments yet to be paid for, like the kids' college education, weddings or retirement.
There are many ways to slice and dice these numbers, but they all tell the same story: The debts from these programs are huge and unaffordable.
Not only are these cuts small, nearly one-third of this money in the House bill comes from new revenues, such as pension-insurance premiums and proceeds from television-spectrum auctions. The Senate bill has even more new revenue. And these bills include additional spending for Katrina relief and extra help to low-income families for winter heating bills.
Some of these savings, most notably the changes in Medicaid and food stamps, have been maligned as devastating to the poor. In fact, these measures are good first steps that lay important groundwork for future reforms. The House bill eliminates gimmicks such as transferring or hiding assets that middle-class families use to qualify for Medicaid long-term care and adjusts the complex formulas for prescription drugs on more realistic cost estimates. It also eliminates a quirk in the law that allows people who are ineligible for food stamps to automatically qualify for benefits. These are people who earn too much to get food stamps but are eligible for job placement or child care. It also would require legal residents to live here for seven years, instead of five, before they're eligible for benefits. Remember, their sponsors sign an oath that they will be responsible for them so they won't become a burden on taxpayers.
These will be among the more contentious issues for lawmakers to resolve, along with opening up the abundant energy reserves in the Arctic National Wildlife Refuge and the Senate's changes to Medicare. Certainly, some will want to water down most the important provisions in each bill, but it would be better to take the highest common denominator. Best would be to take a bigger step still: Postpone the unaffordable prescription drug bill and expand the current drug cards for low-income seniors to preserve their drug coverage.
These spending reductions are a good first step, but they're
like bailing water out of a rowboat with a Dixie cup - a good place
to start, but much more is needed.
Alison Acosta Fraser is director of the Roe Institute for Economic Policy Studies at The Heritage Foundation (heritage.org).
First appeared in the Philadelphia Inquirer