May 21, 1995
"At Least They Have a Plan"
San Jose Mercury News
By Timothy Taylor
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IT'S EASY to criticize the Republican proposals to balance the budget by 2002. But at least they have a plan. The Clinton administration has nothing, and seems proud of it.

The Republicans actually have two plans, the House version from John Kasich of Ohio and the Senate's from Pete Domenici of New Mexico. Under Kasich's plan, which passed the House on Thursday, total spending would be nearly $1.4 trillion less over the next seven years than is currently planned; under Domenici's plan, the reduction would be about $960 billion. Kasich would use the greater savings to pay for the tax cut the House has already passed. The Senate offers smaller budget cuts and no immediate plans for a tax cut.

In both plans, the biggest savings come from holding down spending on Medicare for the elderly and Medicaid for the poor. Kasich gets one-third of his savings from those two programs; Domenici gets almost half. Both also include a jumble of smaller cuts, with reductions in welfare spending being one of the largest.

Of course, like all sweeping changes, the Republican plans can be criticized on a number of grounds. For example, rather than specifying how to hold down Medicare spending, they propose the tired dodge of appointing a bipartisan commission to deal with the issue.

Some optimistic economic projections are built into the Kasich plan. He counts on saving a fairly whopping $170 billion when lower budget deficits reduce interest rates, and thus lower the government's interest payments. Domenici prudently does not include such hypothetical savings, but if the savings do occur he would be willing to refund them as a tax cut.

One can also disagree with some of the Republican priorities for cuts. While welfare needs reforming, I suspect that doing the job right will cost extra (at least in the short term) for education, training and job support.

I also wish that the Republicans had looked for additional spending restrictions on Social Security, defense and agricultural price supports. While I'm no fan of raising income taxes, I have long supported higher taxes on gasoline and certain pollutants, both to provide incentives for environmental protection and to reduce the deficit.

But whatever my personal disagreements with some choices in the Republican plan, they have put real deficit reduction on the table, with real dollars attached. The Clinton administration is offering only reasons for inaction.

For example, one reaction from the Clintonites has been that the Republicans must drop their tax cut as a precondition for any talk about spending reductions. But Senate Republicans haven't passed a tax cut. Rather than accept Domenici's approach of avoiding a tax cut, and arguing for his own deficit reduction, Clinton is opting out altogether.

A second Democratic response has been that Medicare and Medicaid shouldn't be reformed without a broad overhaul of the entire U.S. health care system. Notice that the Clinton administration is not disagreeing that Medicare and Medicaid spending must be held down; in fact, similar cuts were included in Clinton's health care plan last year.

I agree that the U.S. health care system spends too much, shortchanges primary care, provides too many high-tech services that have little or no impact on health, and needs structural reform. But it is counterproductive and a bit silly to say that we can't reform government health insurance unless we also change the rules for all private health insurance.

Someone needs to tell the Clinton administration that reforming Medicare is not optional; in its present form, the program is headed for bankruptcy. Saying that you won't fix Medicare unless the entire health care system is fixed is like saying that you won't treat someone's heart attack until they get more exercise, eat more fiber, and give up smoking.

The Clinton administration's final answer to the Republican proposals is that balancing the budget by 2002 is an "arbitrary campaign promise." Clinton's economists are warning that if the deficit is reduced too quickly, it could bring on a recession.

The best answer to this fear came from Charles Schultze, an eminent economist with Democratic leanings: "The danger that the Congress and the Executive will make egregiously excessive cuts in the budget deficit," he wrote a few years ago, "is something that probably should rank about 86th on your list of worries, following immediately after the fear of being crushed alive by a python."

When the federal government borrows hundreds of billions of dollars every year to finance its budget deficits, less is available for investment by private industry, and the U.S. economy becomes overly dependent on capital borrowed from abroad. That path will gradually limit America's productivity growth and standard of living, and ultimately make it impossible for programs like Social Security to keep their promises.

By peevishly refusing even to put forward a long-term plan for deficit reduction, however high-sounding their reasons, Clinton and the Democrats are perilously close to taking the position that deficit reduction is not particularly important.

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