July 30, 1997 in Nation/World

A Balancing Act New Budget Has Something For Everyone - Scary, Huh?

William Neikirk Chicago Tribune

President Clinton and Republicans in Congress hailed their new balanced budget agreement Tuesday for its bountiful supply of political sugar for kids, students, the middle class, the poor and the rich.

Few pieces of legislation have produced such a comprehensive array of benefits for so many groups: help for immigrants, for firms locating in old urban industrial areas, for investors who seek lower taxes on their stock sales, for small businesses, for children without health care.

About the only thing missing is the pain.

The booming economy not only brought the Treasury an unexpected flood of revenue that sharply reduced the deficit, but it also enabled the White House and Congress to turn their backs on the difficult choices ahead and dole out benefits long denied taxpayers.

The agreement lays out a five-year blueprint for balancing the budget in 2002, but not until the last two years of the plan is much austerity imposed.

“Nobody’s talking about sacrifice,” said Martha Phillips, executive director of the Concord Coalition, a group dedicated to budget restraint. “It’s a short-term Band-Aid. It ignores the long-term fiscal illnesses of Medicare and Social Security.”

“This is not a proposal that involves a great deal of political courage,” said Robert Reischauer, former director of the Congressional Budget Office. “This is an agreement by the 105th Congress to require the 107th Congress and President Gore to make some really tough decisions.”

The only immediate pain may be felt by the nation’s health care providers, who will see their Medicare payments restrained sharply during the next five year. Medicare recipients will pay modestly higher monthly premiums.

But not until 2001 and 2002 will much true budget reduction get done. That’s when new “caps” on federal discretionary spending - covering programs other than entitlements or the military - will take effect, requiring difficult decisions by Congress and the president. The overall reduction will be on the order of 9 to 10 percent.

No one was talking about such decisions Tuesday at either end of Pennsylvania Avenue. An air of celebration surrounded the White House and Congress as the president, the vice president and Republican and Democratic members of Congress bragged about all that had been done for people - not to them.

Clinton trumpeted the “most significant increase in education in 30 years.” Vice President Al Gore called it a “progressive balanced budget. We are eliminating the budget deficit while investing more in the future and cutting taxes for the middle class.”

House Speaker Newt Gingrich, R-Ga., who after the Republicans captured control of Congress tried to slash program after program and eliminate some federal departments, was aglow. “A great bill for all Americans,” he said.

But others raised troubling questions about the agreement. They noted that it creates several new federal entitlements, such as education subsidies and a child health-care program, that could grow sharply. They worried that the balanced budget agreement could unravel in the next century without restraint on Medicare and Social Security.

“This is kind of a scandal,” said William Niskanen, chairman of the CATO Institute, a libertarian think tank. By cutting taxes and raising some spending, the White House and Congress may have prolonged the day when the United States has a balanced budget, he said.

In the meantime, he noted that the White House and Congress missed opportunities to restructure the Defense Department, control the rise in entitlements, or reform the tax code. “The pain is two congressional elections and one presidential election away,” he said.

Both sides made the problem of balancing the budget look easy - and with so much new money pouring in, it was. Republicans got their child care tax credit, expanded individual retirement accounts and a generous reduction in the top capital gains tax rate from 28 to 20 percent. Clinton got his new subsidies for college tuition, restoration of benefits for immigrants, a new child health care initiative financed by a cigarette tax increase, and a tax break for people moving off welfare.

The agreement is brimming over with proposals by both parties to assist the middle class, the decisive group in American politics. In addition to the child tax credit, there is a $500,000 tax exemption on the profit from the sale of a principal residence, more generous estate tax relief, and Clinton’s new “Hope scholarships” to help defray the cost of college tuition.

On Capitol Hill, members of Congress spoke of a new era when taxes are lower and government is shrinking.

But Phillips said she fears that four years from now, Congress will shrink from tough choices and refuse to make the sharp reductions in federal spending called for in the agreement. If there’s a budget surplus, she said, it will be easy for political leaders to spend the money and avoid the pain. Her evidence? It has happened before.

Thoughts and opinions on this story? Click here to comment >>

Get stories like this in a free daily email