Facing Facts Alert 16

Volume II ( Number 4 April 26, 1996

Facing Facts Alert 16

The Truth about Entitlements and the Budget
A Fax Alert from The Concord Coalition
Volume II ( Number 4  April 26, 1996)


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

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

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.


The Concord Coalition web pages were designed by Marla Parker and Krista Reymann. These pages are now maintained by Craig Cheslog. . Last updated: 24 Apr 1997