October 25, 1995 in Nation/World

Lawmakers Square Off In Main Event Congress Expected To Pass Spending Bill That Touches All Our Lives

R.A. Zaldivar Knight-Ridder

It is the mother of all budget bills.

And it touches us all.

The House and Senate this week expect to pass a foot-high GOP bill that would put the government on track to a balanced budget in seven years, as well as cut taxes for many middle-class and wealthy people.

Americans numbed by years of congressional budget babble may not realize it, but this bill is different. It commits to actually balancing the federal budget by a certain date.

“Previous bills have reduced the deficit, but never attempted to get to a balanced budget,” said Susan Tanaka, a budget expert with the Committee for a Responsible Federal Budget, a nonpartisan anti-deficit group.

“The basic message is that we should pay for the government we get,” Tanaka explained.

The Republican bill runs to more than 1,900 pages in the Senate version, more than 1,500 pages in the House. Its provisions, set down in cryptic legislative language, would affect the lives of nearly every American.

For example:

College students would face higher interest costs on education loans.

Stock market players who buy low and sell high could exclude half their gains from income taxes.

Millions of elderly Medicare beneficiaries would be encouraged to join cost-conscious managed-care health plans, instead of the traditional open-ended government plan. They’d also pay higher premiums for Medicare coverage.

Nursing-home residents would lose federal standards that help protect their quality of life.

Middle-class and some upper-income families would get a $500-per-child tax credit.

Working poor families would lose part of a government payment that’s intended to encourage them to keep working.

Welfare recipients would be required to work.

Doctors and hospitals would have to adjust to scaled-back Medicare and Medicaid payments.

In Washington, the bill is known as “reconciliation,” an unusual name considering all the political fighting it gives rise to.

It “reconciles” existing laws on government benefit programs - which make up about half the budget and spend money automatically - with new fiscal priorities. The GOP welfare and Medicare reform bills are part of the package.

Reconciliation accounts for 70 percent of the $894 billion in savings Republicans need to balance the budget. (The rest comes from cuts in other government programs and savings on projected interest costs.)

“This is the main event,” said economist Robert Reischauer, former director of the Congressional Budget Office. “This is the center ring of the circus.”

President Clinton has threatened to veto the Republican reconciliation bill. But he’s also saying he wants to balance the budget by a certain date - maybe in as little as seven years - and cut taxes.

If a deal is reached, there would be a dividend for society. A balanced budget would lead to lower interest rates and stronger economic growth. The load of debt on future generations of taxpayers would be greatly reduced.

But under the Republican bill, Americans would have to accept a different set of priorities with regard to the elderly and the poor. At the same time, a significant part of the Republican tax cut would accrue to the wealthy.

With the exception of Social Security - which is untouched - the GOP bill would change the basic philosophy that has stood behind government benefit programs for decades.

Programs like Medicare for the elderly, Medicaid for the poor, and welfare have traditionally had two distinctive features:

First, they pay benefits on behalf of anyone who is legally qualified to receive them. (That’s why they’re called entitlements.)

Second, there’s no overall limit on program spending.

The GOP plan would abolish an individual’s legal right under federal law to receive welfare and Medicaid benefits. Instead, states would get lump sums to provide health care and welfare through their own programs.

And in an equally significant step, overall spending on Medicare and Medicaid would be limited.

If health-care costs exceed the limits imposed by Congress, elderly Medicare beneficiaries might have to settle for lower quality or pay more out of their own pockets. And states might decide to deny benefits to poor families who now get health care paid by Medicaid.

“For the first time in 30 years, the federal government is going to limit its exposure in paying for health care for the elderly, the disabled, and the poor,” said Reischauer.

Republicans say you can’t balance the budget without tackling health care costs. Democrats say you don’t need to cut taxes for the wealthy at the same time.

This year’s budget debate is about more than numbers, Tanaka said. “It is a change in the nature of government’s responsibility.”

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