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Political malpractice

Money | President Bush's budget plan does almost nothing to address the severe long-term budget problems facing U.S. taxpayer

Issue: "Tighter lips?," Feb. 18, 2006

Imagine going to your doctor with a high fever and having him focus intently on a hangnail on one of your fingers.

The fiscal equivalent of that scenario is now playing out in Washington, as Republicans and Democrats debate the federal budget that President Bush proposed last week. The Bush budget makes some nods toward short-term fiscal discipline, and those moves are gaining a lot of attention. But his plan does almost nothing to address the severe long-term budget problems facing U.S. taxpayers.

President Bush, for example, proposes to freeze domestic discretionary spending this year to help pay for the war against terrorism-a big change for a president who up until now has increased discretionary spending across the board.

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He also wants to eliminate or cut 141 small programs and to make his earlier tax cuts (some of which helped increase federal revenue by encouraging work and investment) permanent. Taken together, the president says his budget plan will cut the deficit in half by 2009.

These proposals are fine, say many conservative analysts, much like it's good to take care of a pesky hangnail. But the budget plan's silence, or at least near-silence, on the growth of three programs-Social Security, Medicare, and Medicaid-amounts to ignoring a dangerously high fever.

A look at the numbers, courtesy of Heritage Foundation budget analyst Brian M. Riedl, shows why. Many Americans do not realize it, but fully 40 percent of all federal spending goes to just three programs-Social Security, Medicare, and Medicaid, which account for about $1.1 trillion in a $2.7 trillion budget.

The problem is that these three already-mammoth and growing programs are slated to grow even faster in coming years as 77 million baby boomers start drawing benefits from them. Left alone, spending on the three big entitlements will more than double by 2015, and then really spike in the decades after that.

Mr. Riedl points out that without cuts in these three programs, future lawmakers will face three unsettling options: raise taxes until they are 60 percent-or $11,000 per household-higher than they are today, eliminate every other program in the budget by 2045, or watch the federal debt threaten the economy in a few decades. The total unfunded liability for the three programs stands at a staggering $46 trillion, more than 10 times the current national debt.

This reality makes Democratic charges that Mr. Bush is trying to eviscerate Medicare with his new budget almost comical. The president's budget finds "savings" of $36 billion in the program over five years, an idea that has sent Democrats and some Republicans to the barricades. "The only good news," Sen. Charles Schumer (D-N.Y.) told The New York Times, "is that it is so deep and wide, and affects the whole nation, that we have a very decent chance of reversing a good part of it."

What's left unsaid is that President Bush's budget would increase Medicare spending by 66 percent between 2005 and 2011. Left alone, Medicare spending would rise 70 percent over the same time period. Mr. Bush's slight restraint in growth is what Sen. Schumer decries as a "deep and wide" cutback.

But the broad outlook for entitlements also makes the president's pledge to cut the deficit in half by 2009 less important than it first sounds. If anything, it "distracts policymakers from the real issue of unsustainable trends in long-term entitlement spending," according to Mr. Riedl.

With tens of trillions in future entitlement costs, whether the deficit is $400 billion or $200 billion in 2009 is not the biggest issue facing Washington. "Even if the budget were balanced today, entitlement reform would be no less important," argues Mr. Riedl. "Lawmakers should focus on the long term."

Timothy Lamer
Timothy Lamer

Tim is managing editor of WORLD magazine.

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