Volume II ( Number 4 April 26, 1996
Facing Facts Alert 16
FACING FACTS The Truth about Entitlements and the Budget A Fax Alert from The Concord Coalition Volume II ( Number 4 April 26, 1996) THE UN-BUDGET DEAL The press proclaimed this week's budget agreement in banner headlines. The White House praised it as a crucial step toward a balanced budget. Newt Gingrich called it a "great achievement" and Bob Dole a deal to be "proud" of. To judge by the congratulatory rhetoric, Americans might suppose that something important had happened. Alas, this is not the case. As a fiscal document, the "stalemate-ending" omnibus appropriations measure has zero long-term significance. It merely grants budget authority to programs comprising approximately a third of "discretionary" spending, which itself comprises approximately a third of the federal budget, for the balance of the current fiscal year that is, for the next five months. The deal's real significance is political. Both sides can now claim progress toward a balanced budget without engaging the one issue that matters: entitlements. Apparently, this is what Washington means by "bipartisanship." Nickel and Dime Skirmishes Let's start with the numbers. After thirteen stopgap spending measures and two partial government shutdowns, the final deal leaves FY 1996 discretionary outlays totaling just $17 billion less than what the CBO was projecting before the 1994 elections. According to Robert Livingston, chairman of the House Appropriations Committee, this accomplishment means that "government is no longer growing incessantly." Really? Under the (December 1995) CBO baseline budget projection, federal outlays are slated to grow by a cumulative $1,655 billion from 1996 to 2002. This week's deal will cut that growth by a mere one percent. With the ink hardly dry on the agreement for FY 1996, it's already time to start negotiations over the FY 1997 discretionary budget. Squeezing out savings won't be any easier the next time around. Yes, both sides are on record with seven-year budget plans that would cut discretionary spending by roughly one-fifth in real dollars. But most of this cutting is scheduled to occur after the next three elections which is to say never. Discretionary spending (on everything from Head Start to the Pentagon) is already plumbing record lows as a share of the federal budget. From 69 percent of total expenditures in 1965, discretionary outlays fell to 36 percent in 1995; by 2002, they will drop to 30 percent, even without the latest cuts. The real problem lies elsewhere in the explosive growth in entitlements. So long as both parties refuse to admit that we cannot afford the growing cost of what they pretend they cannot control, any talk of budget balance is pretense. To be sure, last year's budget proposals flirted with entitlement reform. But these proposals were not enacted, and had they been, they would barely have crimped the long-term growth in federal benefit spending. As we pointed out in a recent alert, even the "draconian" Republican plan would have allowed entitlements to grow by 9.4 percent of GDP between 1996 and 2030an increase that is greater, as a share of the economy, than today's entire discretionary budget. Moving the Winnebago The failure of Washington to grapple with entitlements reflects the broader failure of the public to focus on our real fiscal choices. According to one poll, 94 percent of Americans favor cuts in foreign aid, 77 percent favor cuts in public housing, and 75 percent favor cuts in NASA programs that together make up roughly 3 percent of the federal budget. Meanwhile, though a large majority of Americans insist that the budget should be balanced, only 22 percent favor cuts in Medicare and just 14 percent favor cuts in Social Security. These two programs, together with uncuttable interest costs, make up half of the federal budget. Concord president Pete Peterson likes to say that trying to eliminate the deficit without touching entitlements is like trying to clean out the garage without moving the Winnebago. We would like to take the GOP leadership and the administration at their word when they say they remain ready to negotiate a balanced budget. Unfortunately, by reconfirming the public's misconceptions about the nature of the challenge before us, the spin being given to this week's deal could make it more difficult than ever to re-engage the real issue.
FACING FACTS AUTHORS: Neil Howe and Richard Jackson CONCORD COALITION EXECUTIVE DIRECTOR: Martha Phillips