Jewish World Review June 18, 2001 / 28 Sivan 5761
A new study by the bipartisan Concord Coalition warns that President Bush's tax cuts and Congress' spending patterns are likely to deplete the 10-year on-budget surplus of $3.1 trillion, wipe out reserves meant for Medicare and force a new raid on Social Security.
In other words, instead of preparing to help pay for their own astronomical retirement costs, the baby boomer generation's leaders are getting ready to squander the surplus - and leave their children holding the bag.
If former President Bill Clinton's personal morality and self-absorption represented the cultural excesses of the boomer legacy, Bush represents economic and ideological self-indulgence.
Bush, unlike Clinton, is willing to risk political wrath to reform Social Security and Medicare. But his tax cuts are so large that he has left too little money to pay for alterations to these programs.
Even reduced to $1.35 trillion by Congress, his 10-year tax cut will cost at least $1.66 trillion, counting the money the government will have to pay in interest. That will reduce the non-Social Security surplus to $1.44 trillion.
This number assumes that Congress actually allows the tax cuts to end in 2011 under a dubious "sunset" provision written into the tax bill to limit the cost.
Besides being pricey and forcing spending limits on arguably needed social programs, such as long-term medical care insurance and upgrades to child care, Bush's tax cut goes disproportionately to people who already are doing well (another example of indulgence).
None of Bush's original tax cut was intended for the working poor, who don't pay income tax but do pay payroll taxes. This was somewhat corrected by Congress' making the child tax credit refundable.
Still, the lion's share of the final tax cut goes to the highest income groups. And as a recent Congressional Budget Office study shows, in the past two decades, the pre-tax annual income of the top 1 percent of households increased by 142 percent while the income for the lowest 20 percent dropped by 3.4 percent.
The Concord Coalition's director, Bob Bixby, confirms what Democrats have been charging, namely that, beyond the tax cuts, new spending commitments in the just passed Congressional budget resolution will sap the surplus further, as will tax and spending actions yet to come.
The bottom line, Bixby figures, is that the Social Security surplus, instead of providing $2.5 trillion to pay down the debt and strengthen the economy, will only be $1.6 trillion.
Instead of being reserved or used to finance private savings accounts to secure the retirements of younger, post-baby boom workers, $900 million of the surplus will be spent, he calculates.
Do the math. After the tax cuts the non-Social Security surplus is $1.44 trillion.
Congress' budget resolution anticipates new spending of $550 billion, the largest item being $300 billion for a prescription drug benefit for Medicare.
That is generally considered nowhere near enough to adequately finance the benefit - $500 billion is the preferred Democratic figure - and it includes just $28 billion to help uninsured workers buy health insurance between now and 2004, and nothing thereafter.
Counting in debt-service costs for this spending, Bixby figures that the non-Social Security surplus will be down to $490 billion before Congress and Bush take some almost certain tax actions and before realistic spending expectations are figured in.
Extending the research-and-development tax credit and other tax laws will cost $100 billion, and adjusting the alternative minimum tax so that middle-class people aren't clobbered by it will cost $250 billion.
Then there's new spending. The CBO calculates the surplus based on the notion that government programs will increase at the rate of inflation (3 percent).
Bush and Congress are pledging to hold spending to 4 percent. But over the past three years, the Republican Congress and Clinton increased it by an average of 6 percent.
Bush and his budget director, Mitchell Daniels, are promising vetoes if spending goes above 4 percent on any individual appropriations bill, but it's doubtful the administration will actually risk shutting down portions of the government to enforce the limit - especially when the Pentagon is likely to seek major increases.
So Bixby figures, realistically, that spending over the next decade will rise by 5 percent, which will mean an additional $840 billion. Debt service on that, on tax extenders and the alternative minimum tax, and on budgeted spending will subtract $200 million more from the surplus.
The grand, dismal total is a $900 billion raid on Social Security - just about the amount that experts figure would be necessary to set up private savings accounts.
To blow a treasure like a $3.1 trillion surplus is irresponsible.
Fortunately, there's time to change the game plan - after it's
been the main topic of the next