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 
 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 

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 
 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.


 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.


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