Government Spending & Budget

       As many Federal departments and agencies lurch into an era
of running without funds, the leaders of both parties of Congress
are spending less and less time searching for a compromise to
balance the budget, and more and more time deciding how to use it
to their advantage on the campaign trail. Meanwhile money is
easily borrowed to pay 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 to balance the Federal Budget by
the year 2002 (Hager 1899). This would be done by incorporating
$894 billion in spending cuts by 2002, with a projected 7 year
tax cut of $245 billion. If this plan were implemented, in the
year 2002, the U.S. Government would have the first balanced
budget since 1969.

       There is doubt by citizens that a balanced budget will
become reality.  A recent Gallop Poll from January, 1996 showed
the budget as the #1 concern among taxpayers, but 4/5 of those
interviewed said they  doubt the GOP will do the job (Holding
14). Meanwhile, an ABC poll  from November reported that over 70%
of those polled disapprove of the current performance by
Congress, and most blamed politicians for  failure to take action
(Cloud 3709). These accusations of failure to  follow through
come with historical proof that Congress and Clinton  have failed
to compromise and resolve the issue. After all, current budget
plans are dependent on somewhat unrealistic predictions of
avoiding such catastrophes as recession, national disasters,
etc., and  include minor loopholes. History has shown that every
budget agreement  that has failed was too lax. One might remember
the  Gramm-Rudman-Hollings bill that attempted to balance the
budget, but  left 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 brought  the federal budget back to square one.
Clinton thought such a demand  on Republicans to produce a budget
would produce inner-party quarrels and cause the GOP to implode.
Instead, they produced a fiscal budget that passed both houses of
Congress, only to be stalemated by a stubborn Democratic
President Clinton. Meanwhile, Clinton bounced back with a CBO
scored plan with lighter, less risky cuts to politically
sensitive areas like entitlements. Clinton's plan also saved
dollars for education and did not include a tax increase, but
most cuts would not take effect until he is out of office, in the
year 2001. Although Clinton is sometimes criticized for producing
a stalemate in budget talks, the White House points out that the
debt has gone down since Clinton took office, with unemployment
also falling. Republicans are quick to state that Clinton
originally increased taxes in 1993 and cut defense programs, but
his overall plan was for an increasing budget without deficit
reduction.

 Startling Facts about the budget:

       As of 1996, the national debt was at an all time high of
$5 trillion dollars, with interest running at a whopping $250
billion per year (Rau M-1). This equals out to an individual
responsibility of more than $50,000 per taxpayer. Nearly 90% of
that debt has accumulated since 1970, and between 1980 and 1995,
the debt grew by 500%. Currently, the debt grows by more than
$10,000 per second (Rau M-l), and at current rates, a baby born
in 1992 will pay 71% of his or her income in net taxes. At
current rates, our government is about to reach its breaking
point. If that's not enough to scare a taxpayer, by 2002, 60% of
government spending will be for entitlements, and by 2012, these
programs are projected to take up all government revenue (Dentzer
32). Not only economic development, but also family income is
hurt by debt. With the cost of living going up, it becomes harder
to find a job. According to the Concord Coalition, real wages
peaked in 1973 and have gone down ever since. If the economy grew
as fast as it did 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 government spends $1.64 trillion yearly. $500 billion of
that, or 1/3 of the total, is for discretionary spending (Rau M-
1). This discretionary spending is the target for most cuts, and
seems to be the easiest to make cuts in. Overall, the difference
between the two parties budget plans is only $400 billion. This
could easily be trimmed by eliminating tax cuts and adjusting the
consumer price index to reality. Democrats say the GOP plan is
too lopsided, and Republicans criticize the Democrat plan for
being unrealistic. A study by the Urban Institute shows GOP cuts
will be felt mainly by the bottom 1/5 of U.S. population. This
should be more equally spread out across income brackets
(Hosansky 1449).

 The GOP plan:

       By fulfilling campaign promises made by freshman
Republican Congressmen to cut government spending, the GOP
managed to pass a $1.6 trillion budget resolution by a party-line
vote, in both houses of Congress (Hosansky 1450). This budget
called for major cuts in education, environmental programs,
discretionary spending, and the largest of all: entitlements. 70%
of the money to balance the budget under the GOP plan would have
come from entitlements. This is because entitlement programs
currently take up $301 billion a year. Such cuts had already been
partially implemented with the GOP cutting overall spending by
9.1% in 1996 alone.

       First, in an attempt to stop the projected bankruptcy of
Medicare in 2002, Republicans cut $270 billion overall from the
program, with hospital reimbursement cuts being the deepest
(Hager 1283). Although stabilizing the fund is only expected to
cost $130-$150 billion over 7 years, the GOP budget would reform
the program to run better, and cheaper, by allowing it to grow at
6% yearly, instead of the current 10%. While both parties agree
on premium hikes for beneficiaries, this is a touchy subject for
the 38.1 Million elderly voters on Medicare in 1996 (Rubin 1221).
Medicaid, another volatile program, would be cut $182 billion
under the GOP proposal. This would entail placing a cap on the
program's spending, and passing control of it to the individual
state governments. For an estimated 39 million low-income people
on Medicaid in 1996, the GOP plan cuts the program far more than
Clinton's proposed $98 billion cut. Social Security is another
program being cut.

       The government has already reduced the outlay for seniors
70 and younger who are on the program, but Republicans want more
by increasing the eligibility for Social Security from 62 to 65
for early retirement, and 65 to 70 for standard retirement
(Henderson 60). Smaller cuts included $11 billion in student loan
reductions, $9.3 billion in labor cuts, $10 billion eliminated
from public housing programs, and several other numerous disaster
relief programs cut (Rubin 1222). The GOP also wants to eliminate
programs initiated by Clinton like the National Service
initiative, summer jobs, Goals 2000, and Americorps. Also, by
terminating unnecessary farm programs, and cutting others by
$12.3 billion, Republicans hope to cut the yearly $6 billion that
the Federal Government spends on direct subsidies to farmers.
Agricultural policies were also reformed and embedded into
budget-reconciliation bills (Hosansky 3730).

 Clinton's Budget:

       Clinton's budget only surfaced after he vetoed the budget
passed by Congress, and included shallower cuts, with little or
no reform to entitlements. This plan was supported by most
Democrats and was used as an alternate to a gutsy GOP budget.
Clinton repeatedly trashed the Republican's efforts to make cuts
on programs he feels important like student loans, agricultural
programs, and entitlements. He accused Republicans of wanting to
kill some all together. He has also threatened to veto a
Republican plan to reform Medicare called Medical Savings
Accounts, unless his programs are left intact (Hager 752).
Under Federal law, the President is required to submit budget
requests in 2 forms: Budget Authority (BA), the amount of new
federal commitments for each fiscal year, and Outlays, the amount
actually spent in the fiscal year (Rubin 1221). The plan that
Clinton has presented is not only a budget resolution in the form
of a campaign document, but also proof of how far the Republicans
have moved him to compromise since the they took control of
Congress. Most important, it does not readily translate into
regular accounting principles used for government programming.

       This year's White House budget was a 2,196 page document
that the GOP struck down immediately for not cutting taxes enough
and neglecting to downsize the government (Hagar 752). "There is
little or no change at all in this budget," said Pete Domenici
(Senate Budget Committee Chairman), talking of Clinton's new
budget. Among largest cuts within Clinton's plan was the
downsizing of 1/5 to 1/3 of all programs that he felt were not a
priority to present day government. In addition, he wanted to
close loopholes presented to corporate taxation, that would save
an estimated $28 billion. He vowed to keep programs like
education, crime prevention, and research or environmental
grants, while increasing the Pell Grant from $2,340 to $2,700.
Attention was also placed on discretionary spending, with
Clinton cutting a smaller $297 billion compared to GOP's $394
billion cut.

       According to the Office of Management and Budget, the
President's plan cuts middle-income taxes by $107.5 billion in 7
years, small business by $7 billion, and cuts $3.4 billion from
distressed urban and rural area relief (Rubin 1222). This was to
be paid for by a $54.3 billion hike in corporate and wealthy-
income taxes, and also in $2.3 billion of tighter EITC (Earned
Income Tax Credit) adjustments. Although Clinton's plan was
expected to cut a whopping $593 billion in 7 years to furthermore
produce an $8 billion surplus in 2002, most cuts are long term
without a clear goal.

       Clinton is sometimes criticized by Republicans for
unwillingness to compromise. He has used vetoes and stubborn
negotiations to protect personal priorities like education, job
training, and environmental programs, but Republicans have also
tried using domination to force  him to comply. GOP Presidential
candidate Bob Dole said if Clinton was serious about the budget,
"we probably could have had an agreement on New Years Day," 1996
(Hosansky 1449). "The President is sitting on his hands while the
federal debt keeps going up and up and up into the stratosphere,"
said Congressman Jesse Helms, Rep -North Carolina. But one must
remember that President Clinton does have somewhat of an
overwhelming power in this debate that Republicans can do nothing
about. He is the single person that can veto laws sent to him,
and also has the power to call Congress back into session if he
is unhappy  with the current situation. This was President
Truman's "ace in the hole" back in 1948.

 A Neutral Proposal:

       As a neutral proposal, a group calling themselves the
"Blue Dog's" have won support for their budget from both
Republicans and Democrats. The group also known as the Concord
Coalition includes many conservative Democrats that want to see
shallower budget cuts with less reform to entitlements. They also
believe a tax cut should be delayed until the budget is balanced.
The Coalition believes that by reforming entitlement policy,
rethinking government size, changing taxation methods, and
consuming less, our budget can be balanced (Rau M-1).

 Defending Deficits:

       In defense of deficits, some may argue that the danger of
the current situation is highly over rated. A budget deal has
always had less to do with economics than with politics and
morality. Budget deficits don't crowd out private investment,
government spending does, and a large surplus may not be a sign
of strength for a country. Some say it is impossible for every
country to run either a surplus or a deficit. What matters is
that a country can service its debts (Defense 68). During most of
the 19th century, the United States borrowed from the world (a
current-account deficit). By 1870, it was running a trade
surplus, and by 1900 we had a current-account surplus. But in the
early 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 a net debtor again (Bottom Line 14).


 Current Reductions:

       One of the ways we are currently reducing the deficit
includes the introduction of "means testing." This means that
people would get entitlements based on need. The government
already has reduced Social Security for modest income seniors age
70 and younger, but budget cutters want to broaden that idea
(Henderson 60). There are 2 major problems with means testing.
First, it is considered inherently unfair.

       Some might argue that a person might blow all of their
income before the entitlement reductions come into place. Second,
it might reduce the incentive to work and encourage people to
hide their income. For instance, beneficiaries of Social
Security, ages 62-64, lose $1.00 yearly in benefits for every
$2.00 they earn in income or wages above $8,160 per year
(Henderson 60). Some say increasing eligibility requirements
would solve some problems, and propose raising the age of early
retirement from 62 to 65, and standard retirement from 65 to 70.
Another touchy subject in budget reduction is the argument that
the poor are being left out of savings. According to the Clinton
Administration, the GOP budget would cause a family with income
of $13,325 per year to lose 11% of their income (Whitman 42).
United States Treasury Department studies say the bottom 1/5
income families would have net tax increase of an average $12 to
$26 under the GOP plan. The top 1/5 income families would receive
more than 60% of the tax relief. A HHS analysis states that the
GOP plan would also boost child poverty rates from 14.5% to
16.1%, and poor families with children would loose 6% of their
income.

 Conclusion:

       In the end, budget reduction is no easy task. "...fixing
the National debt is like catching a train leaving the station.
The longer we wait, the harder and farther we have to run," says
the Concord Coalition (Rau M-1). "Both parties want the issue,"
instead of an agreement, said Representative Bill Orton. The
center of attention for debate on budget cutting is politics, and
whomever takes responsibility for reform gets left wide open to
criticism. Although Congress and Clinton have spent the past year
on debating the budget and the size of the Federal Government,
most plans fall back on gimmicks, loopholes, and long-term plans.
Even Democrats now agree to downsize the government, but the two
parties disagree on how and where. As we trust our elected
officials to make decisions in Washington on our behalf, we must
show interest and aptitude on the end results. To accomplish a
balanced budget deal, many suggest that we must not only balance
spending, but reform entitlements, rethink government size,
change tax methods, and depend less on Washington. Attendees of a
conference on budget cutting in Jackson Hole, Wyoming suggested
we deliver a budget that has a simple, quantifiable goal, that
includes short term goals, and eliminated gimmicks. Countries
like Sweden and Canada have successfully reformed fiscal
policies.  Sweden's government elected to abandon welfare,
pensions, health insurance, unemployment programs, family
assistance, and child allowances. 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 debates
continue, "the interests of older Americans are being protected
at the expense of young people," says Neil Howe and Bill Strauss
(Rau M- 1). Older Americans have good reason to protect programs
that they have paid into for years, but those programs spend an
overall per capita amount of 11 times as much on elderly than
that spent on children altogether (Rau M-1). The youth are the
future of America, and we should protect them too. Currently,
poverty in US is 3 times as likely to 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 should be happy with
that.