Fwd: Up From Debt Reduction

Doug Henwood dhenwood at panix.com
Tue Feb 2 06:09:53 PST 1999

[This was addressed to the listowner rather than the list.]

From: sawicky at epinet.org (Max Sawicky) Subject: Up From Debt Reduction Date: Tue, 2 Feb 1999 08:56:48 -0500 MIME-Version: 1.0 X-Priority: 3 (Normal) X-MSMail-Priority: Normal X-MimeOLE: Produced By Microsoft MimeOLE V4.72.3110.3 Importance: Normal

If you consider discretionary spending adjusted for inflation, Clinton's budget allows for $18.2b total increases over the next five years, more than half in FY2000 ($12.6b). In other words, virtually nothing.

All the b.s. you hear about the surplus "funding" new initiatives is spending increases RELATIVE TO THE CAPS, which run through FY2002. (The caps are fixed dollar levels, not adjusted for inflation, which set limits to discretionary spending.)

The greatest crime in the budget, then, is the use of the caps as an implicit baseline, rather than current services (meaning inflation-adjusted and assuming maintenance of current law). The Republicans don't mind this in the domestic field, since it gives them the chance to yell about spending "increases." Problem for them is that the same rule applies to defense. Clinton's increases there are also relative to the caps; compared to current services, there is a defense CUT of $82b over five years ($17b in FY2000).

The increases relative to the caps are contingent on a plethora of offsets (spending cuts, revenue increases, tobacco money) which have also been proposed. The one bright spot in all this is that the caps would be adjusted upward. By FY2004, the total discretionary cap of $599.9b would be raised to $649.3b. (Current services in FY2004 is $671.3b.)

In addition, there is a modest cut in mandatory spending over five years ($24b), none in Social Security, Medicaid, and Medicare. (All this is in aggregate net terms).

There is also a net increase in receipts of $46b.

Where does it all go? Debt reduction.

The net changes mask a myriad of shuffling (both for receipts and discretionary) within categories. The volume of changes underline the improbability of the entire plan, since all these changes under the best circumstances of political harmony take a lot of time for political haggling. They aren't going to happen.

I gather that is also part of the plan. With no budget until September, the President and Congress will eke out the appropriations bills. For FY2000, there is no on-budget surplus, thus nothing to spend without "engangering Social Security." So the surplus will continue to be dedicated to debt reduction. That's the optimistic scenario.

The negative scenario is that this plan passes and a vast amount of resources are precluded from future spending, either via tax cuts (which will be necessary to close a deal), the stock purchase, or the dedication of revenues to the Social Security/Medicare "lockbox."

The Social Security/Medicare "rescue" is the fulcrum for the deal, the thing both party leaderships really want. The loose change for new spending and the somewhat larger amount likely for tax cuts is just the window dressing that gives both parties to the deal something to crow about. Since this is a center- right deal, obviously, the left gets squadoosh. The left, or what passes for it, gets an intact Social Security program, at least for the time being, though this is vulnerable to whatever plans are ginned up to fix the trust fund shortfall projected between roughly 2050 and 2075.

I'd like to go on a long journey, preferably without pharmaceuticals.


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