Present Budget Policy Hurts The Poor
As the president works on the budget he will submit to Congress next year, it is useful to remember one point: While it is important to balance the budget in the next few years, it is equally important how that balance is achieved.
The message was driven home by a report issued last week that essentially showed that the last Congress set out to balance the budget on the backs of the poor.
Overall, roughly one-quarter of the government’s nondefense spending is targeted to low-income families. But over half the savings or cuts signed into law by President Clinton in the last two years came in programs aimed at the poverty population, mainly children on welfare or indigent adults.
The carefully documented study was done by the Center on Budget and Policy Priorities, a liberal think tank. But the findings were endorsed not only by a spokesman for Catholic Charities, but by the Concord Coalition, a bipartisan organization whose main goal is balancing the budget, and by the Committee for Economic Development (CED), a blue-ribbon group of business executives.
Van Doorn Ooms, senior vice president of the CED, made the essential points in three short paragraphs of the statement he read at the news conference where the report was released: “While our political leaders have reached a consensus to balance the federal budget, they have been unwilling or unable to contain the growth of the popular, middle-class entitlement programs, such as Social Security and Medicare, to finance the required reduction in the deficit.
“Second, in an unfortunate surrender to misplaced ideology and political opportunism, our leaders in both political parties have increased the magnitude of the financing problem by insisting that tax reductions be included in their balanced budget plans.
“As a result of the fiscal pressures created by these two factors, the burden of budget austerity has fallen disproportionately on … the poor. As David Stockman observed a decade ago, politics triumphs over policy in seeking out weak clients, rather than weak claims.”
What Ooms is saying - and what the report amply documents - is that the Republican Congress, with the concurrence of President Clinton, took the easy political path and found the needed budget savings in programs whose beneficiaries have the least clout in Washington - the poor.
That is part of a larger pattern in social policy described in a brilliant article in the Nov. 23 issue of the National Journal by one of the best journalists covering Washington, Julie Kosterlitz.
From Social Security in 1935 through Medicare in 1965, she writes, the fundamental trend in government was to find solutions for social problems that required affluent Americans to join those less well-off and pool their resources to protect everyone against the risks of illness or inadequate income.
But in response to powerful economic, demographic and ideological forces, we now seem to be moving in the other direction - toward a fend-for-yourself philosophy.
As Kosterlitz notes, the trend is already well-advanced in the private sector, where many companies have dropped pension plans with guaranteed benefits and substituted individually controlled but subsidized retirement accounts. Some firms are doing the same thing with their health insurance programs.
And the idea is catching on in the public sector. Congress has authorized an experiment with medical savings accounts that would let individuals leave group health insurance plans and accept the risks (and potential rewards) of tax-deferred saving for their own health needs. Now some conservatives want to introduce the same feature into the Medicare program. And there is increasing talk of “privatizing” Social Security by allowing people to use a portion of their payroll taxes to buy individual annuities or stock-market portfolios.
Those who advocate these changes say they will enhance individual responsibility and provide greater economic benefits at lower cost. That is possible, but not yet proved. What is certain is that such changes will increase inequality. The healthier and wealthier among us may do very well; others almost certainly will not.
That is happening already in the private sector. Kosterlitz quotes outgoing Secretary of Labor Robert Reich’s comment that with the decline in the number of companies offering guaranteed pension benefits and the growth in individual 401(k) retirement plans, “the wage gap is being mirrored in a benefits gap.”
Politicians are uncomfortable talking about class differences. But even they cannot avoid reality - or the need for a national debate on these trends.
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