Press Release
Tuesday, July 27, 1999

WASHINGTON --With the House and Senate headed toward passage of a $792 billion, 10-year tax cut, The Concord Coalition today challenged Congress and the President to make the hard choices on discretionary and entitlement spending before enacting a major tax cut. 


“Cutting taxes in anticipation of spending cuts that have not been made, and may never be made, is a recipe for the return of chronic annual budget deficits,” said Policy Director Robert Bixby.  The Concord Coalition pointed out that Congress and the President have yet to agree on several key spending issues, including:


            Discretionary caps  The Congressional Budget Office (CBO) baseline assumes that the discretionary spending caps will be complied with through 2002. It is increasingly clear, however, that this goal will not be met.  Spending will exceed the caps either explicitly or by stealth through the emergency loophole. The projected baseline surplus varies by hundreds of billions of dollars depending upon the path of discretionary spending. Tax cuts should therefore await a more realistic assessment of the non-Social Security surplus, which will be available only after the dust settles on the appropriations bills. 


            Medicare prescription drug benefit Congressional leaders and the President seem to agree that a prescription drug benefit should be added to Medicare. According to CBO, the President's plan would cost $111 billion over ten years. Republican leaders have suggested a less expensive approach, but the question remains C how much will the new benefit cost?


            Social Security reform   The CBO baseline assumes that the entire surplus will be used for debt reduction. But what about Social Security reform?  Many responsible reform plans would use at least the Social Security portion of the surplus as the down payment on a funded system of individually owned Social Security accounts. If combined with appropriate long-term cost savings in the rest of the program, such a reform plan would do more to improve the outlook for future generations than a strategy of debt reduction alone. Enacting a major tax cut now, however, could drain away resources that may well be needed for the costs of transitioning to a more sustainable, generationally equitable Social Security system.


"The bottom line is that, at the moment, political leaders have no idea how to meet the long-term spending promises that have been made for Social Security and Medicare, and no idea how to meet the tough discretionary spending caps on which the baseline surplus is premised. Major tax cuts should await the resolution of these issues. If the politically hard choices are not made before the easy ones, there is a very real danger that we'll end up spending a surplus we don't really have," Bixby said.