WASHINGTON – President Bush displayed political courage on Monday by proposing election-year trims in Medicare and other federal spending. But he was not so brave as to be politically foolish.
For all its advertised cuts in some programs, which drew expected complaints from affected groups, Bush’s budget for the 2007 fiscal year starting Oct. 1 would do little to cut the mega-deficits looming in America’s not-too-distant future.
The president’s $2.77 trillion spending blueprint illustrates that the country’s economics and politics are out of sync. It shows a record $423 billion deficit for the current fiscal year, with the projected red ink falling to $354 billion in 2007, assuming Congress goes along with the plan.
Both sides know and understand the problem of runaway spending. But no one wants to go first, especially not Bush, who needs money to fight a war, make his tax cuts permanent, protect the country from terrorism and finance a few other favorite programs.
Yet Democrats, protecting entitlements and programs popular with their constituencies, are also shying away from any hint of austerity. The president’s Medicare proposals, along with cuts in various programs such as Amtrak and farm price supports, will have a difficult time getting through Congress.
Bush’s budget is “clearly not enough to feasibly solve the most important economic challenge of our era, how to deal with 77 million baby boom retirees,” said Brian Riedl, budget analyst for the Heritage Foundation, a conservative think tank.
This decade was supposed to have been the time when the nation’s politicians faced up to what some feel could be a devastating economic problem. Unfortunately, most experts believe, that time is rapidly slipping away with yet another budget that spurns drastic belt-tightening.
Instead of attempting to curb an explosion in Medicare, Medicaid and Social Security spending that could occur as early as the start of the next decade, Bush focused his attention on achieving modest deficit reduction by the time he leaves office in 2009.
But it’s not the next five years that worry budget experts and economists. Driven by difficult-to-control entitlement spending, the deficit will begin rising sharply in the next decade, perhaps as early as 2011, when the first wave of baby boomers hit 65. And it will require real political courage to stop the hemorrhaging.
By 2026, the Congressional Budget Office projected recently, the federal debt could equal the nation’s annual economic growth, if nothing is done. At that point the interest on the debt would begin to explode, so that it becomes stifling to pay off.
David Wyss, chief economist at Standard & Poor’s, a major credit-rating agency, said U.S. government bonds would achieve junk-bond status by 2026 if changes are not made. And, he said, if no major deficit-cutting action is taken within the next 10 years, the U.S. government could possibly lose its AAA bond rating – a development that would have major domestic and international implications.
Under his proposal, Bush would trim about $36 billion from Medicare spending over the next five years. But Riedl said that if the president succeeds, “this would merely reduce the program’s growth rate over the next six years from 70 percent to 66 percent.”
The Medicare proposal “pushes the envelope, but it’s a very small envelope,” said Rudy Penner, a former economics adviser to President Gerald Ford and once the head of the Congressional Budget Office. It illustrates how much austerity would have to be imposed on the American people, he said, in order to bring the deficit under control.
Democrats criticized Bush for what many called a lack of fiscal responsibility while finding fault with proposed reductions in programs such as Medicare, student loans, veterans benefits and food stamps. The House Budget Committee, in a report on the budget, called some of Bush’s cuts “short-sighted” even as the president called on Congress to make his tax cuts permanent.
Neither Bush’s budget nor the Democratic reaction yielded a clear path for getting out of the deficit mess. The president urged creation of yet another commission to look at reforming Social Security, Medicare, Medicaid and other federal entitlements in hopes that a bipartisan solution can be reached.
Budget analysts said the government could do only so much in controlling runaway federal health-care costs. Higher Medicare and Medicaid spending has been pushed up by big jumps in private health-care costs, and the government so far has been helpless in curtailing private health-care inflation.