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                        Government Spending & Budget
       As many Federal departments and agencies lurch into an era of
 running without funds, the leaders of both parties of Congress are
 spending less and less time searching for a compromise to balance the
 budget, and more and more time deciding how to use it to their
 advantage on the campaign trail. Meanwhile money is easily borrowed to
 pay for government overhead. In an attempt to change this, on June 29,
 Congress voted in favor of HConRes67 that called for a 7 year plan to
 balance the Federal Budget by the year 2002 (Hager 1899). This would
 be done by incorporating $894 billion in spending cuts by 2002, with a
 projected 7 year tax cut of $245 billion. If this plan were
 implemented, in the year 2002, the U.S. Government would have the
 first balanced budget since 1969.
       There is doubt by citizens that a balanced budget will become
 reality.  A recent Gallop Poll from January, 1996 showed the budget as
 the #1 concern among taxpayers, but 4/5 of those interviewed said they
 doubt the GOP will do the job (Holding 14). Meanwhile, an ABC poll
 from November reported that over 70% of those polled disapprove of the
 current performance by Congress, and most blamed politicians for
 failure to take action (Cloud 3709). These accusations of failure to
 follow through come with historical proof that Congress and Clinton
 have failed to compromise and resolve the issue. After all, current
 budget plans are dependent on somewhat unrealistic predictions of
 avoiding such catastrophes as recession, national disasters, etc., and
 include minor loopholes. History has shown that every budget agreement
 that has failed was too lax. One might remember the
 Gramm-Rudman-Hollings bill that attempted to balance the budget, but
 left too many exemptions, and was finally abandoned in 1990
 (Weinberger 33).
       So after a pain-staking trial for GOP Republicans to create,
 promote, and pass their budget, as promised on campaign trail 94,
 Clinton rejected the very bill he demanded. This essentially brought
 the federal budget back to square one. Clinton thought such a demand
 on Republicans to produce a budget would produce inner-party quarrels
 and cause the GOP to implode. Instead, they produced a fiscal budget
 that passed both houses of Congress, only to be stalemated by a
 stubborn Democratic President Clinton. Meanwhile, Clinton bounced back
 with a CBO scored plan with lighter, less risky cuts to politically
 sensitive areas like entitlements. ClintonÕs plan also saved dollars
 for education and did not include a tax increase, but most cuts would
 not take effect until he is out of office, in the year 2001. Although
 Clinton is sometimes criticized for producing a stalemate in budget
 talks, the White House points out that the debt has gone down since
 Clinton took office, with unemployment also falling. Republicans are
 quick to state that Clinton originally increased taxes in 1993 and cut
 defense programs, but his overall plan was for an increasing budget
 without deficit reduction.
 Startling Facts about the budget:
       As of 1996, the national debt was at an all time high of $5
 trillion dollars, with interest running at a whopping $250 billion per
 year (Rau M-1). This equals out to an individual responsibility of
 more than $50,000 per taxpayer. Nearly 90% of that debt has
 accumulated since 1970, and between 1980 and 1995, the debt grew by
 500%. Currently, the debt grows by more than $10,000 per second (Rau
 M-l), and at current rates, a baby born in 1992 will pay 71% of his or
 her income in net taxes. At current rates, our government is about to
 reach its breaking point. If thatÕs not enough to scare a taxpayer, by
 2002, 60% of government spending will be for entitlements, and by
 2012, these programs are projected to take up all government revenue
 (Dentzer 32). Not only economic development, but also family income is
 hurt by debt. With the cost of living going up, it becomes harder to
 find a job. According to the Concord Coalition, real wages peaked in
 1973 and have gone down ever since. If the economy grew as fast as it
 did in 1950, without a debt, the median family income would be
 $50,000, compared to the present median of $35,000 (Rau M-1).
 As of current fiscal yearÕs budget, the United States government
 spends $1.64 trillion yearly. $500 billion of that, or 1/3 of the
 total, is for discretionary spending (Rau M-1). This discretionary
 spending is the target for most cuts, and seems to be the easiest to
 make cuts in. Overall, the difference between the two parties budget
 plans is only $400 billion. This could easily be trimmed by
 eliminating tax cuts and adjusting the consumer price index to
 reality. Democrats say the GOP plan is too lopsided, and Republicans
 criticize the Democrat plan for being unrealistic. A study by the
 Urban Institute shows GOP cuts will be felt mainly by the bottom 1/5
 of U.S. population. This should be more equally spread out across
 income brackets (Hosansky 1449).
 The GOP plan:
       By fulfilling campaign promises made by freshman Republican
 Congressmen to cut government spending, the GOP managed to pass a $1.6
 trillion budget resolution by a party-line vote, in both houses of
 Congress (Hosansky 1450). This budget called for major cuts in
 education, environmental programs, discretionary spending, and the
 largest of all: entitlements. 70% of the money to balance the budget
 under the GOP plan would have come from entitlements. This is because
 entitlement programs currently take up $301 billion a year. Such cuts
 had already been partially implemented with the GOP cutting overall
 spending by 9.1% in 1996 alone.
       First, in an attempt to stop the projected bankruptcy of
 Medicare in 2002, Republicans cut $270 billion overall from the
 program, with hospital reimbursement cuts being the deepest (Hager
 1283). Although stabilizing the fund is only expected to cost
 $130-$150 billion over 7 years, the GOP budget would reform the
 program to run better, and cheaper, by allowing it to grow at 6%
 yearly, instead of the current 10%. While both parties agree on
 premium hikes for beneficiaries, this is a touchy subject for the 38.1
 Million elderly voters on Medicare in 1996 (Rubin 1221). Medicaid,
 another volatile program, would be cut $182 billion under the GOP
 proposal. This would entail placing a cap on the programÕs spending,
 and passing control of it to the individual state governments. For an
 estimated 39 million low-income people on Medicaid in 1996, the GOP
 plan cuts the program far more than ClintonÕs proposed $98 billion
 cut. Social Security is another program being cut.
       The government has already reduced the outlay for seniors 70 and
 younger who are on the program, but Republicans want more by
 increasing the eligibility for Social Security from 62 to 65 for early
 retirement, and 65 to 70 for standard retirement (Henderson 60).
 Smaller cuts included $11 billion in student loan reductions, $9.3
 billion in labor cuts, $10 billion eliminated from public housing
 programs, and several other numerous disaster relief programs cut
 (Rubin 1222). The GOP also wants to eliminate programs initiated by
 Clinton like the National Service initiative, summer jobs, Goals 2000,
 and Americorps. Also, by terminating unnecessary farm programs, and
 cutting others by $12.3 billion, Republicans hope to cut the yearly $6
 billion that the Federal Government spends on direct subsidies to
 farmers. Agricultural policies were also reformed and embedded into
 budget-reconciliation bills (Hosansky 3730).
 ClintonÕs Budget:
       ClintonÕs budget only surfaced after he vetoed the budget passed
 by Congress, and included shallower cuts, with little or no reform to
 entitlements. This plan was supported by most Democrats and was used
 as an alternate to a gutsy GOP budget. Clinton repeatedly trashed the
 RepublicanÕs efforts to make cuts on programs he feels important like
 student loans, agricultural programs, and entitlements. He accused
 Republicans of wanting to kill some all together. He has also
 threatened to veto a Republican plan to reform Medicare called Medical
 Savings Accounts, unless his programs are left intact (Hager 752).
 Under Federal law, the President is required to submit budget requests
 in 2 forms: Budget Authority (BA), the amount of new federal
 commitments for each fiscal year, and Outlays, the amount actually
 spent in the fiscal year (Rubin 1221). The plan that Clinton has
 presented is not only a budget resolution in the form of a campaign
 document, but also proof of how far the Republicans have moved him to
 compromise since the they took control of Congress. Most important, it
 does not readily translate into regular accounting principles used for
 government programming.
       This yearÕs White House budget was a 2,196 page document that
 the GOP struck down immediately for not cutting taxes enough and
 neglecting to downsize the government (Hagar 752). "There is little or
 no change at all in this budget," said Pete Domenici (Senate Budget
 Committee Chairman), talking of ClintonÕs new budget. Among largest
 cuts within ClintonÕs plan was the downsizing of 1/5 to 1/3 of all
 programs that he felt were not a priority to present day government.
 In addition, he wanted to close loopholes presented to corporate
 taxation, that would save an estimated $28 billion. He vowed to keep
 programs like education, crime prevention, and research or
 environmental grants, while increasing the Pell Grant from $2,340 to
 $2,700. Attention was also placed on discretionary spending, with
 Clinton cutting a smaller $297 billion compared to GOPÕs $394 billion
       According to the Office of Management and Budget, the
 PresidentÕs plan cuts middle-income taxes by $107.5 billion in 7
 years, small business by $7 billion, and cuts $3.4 billion from
 distressed urban and rural area relief (Rubin 1222). This was to be
 paid for by a $54.3 billion hike in corporate and wealthy-income
 taxes, and also in $2.3 billion of tighter EITC (Earned Income Tax
 Credit) adjustments. Although ClintonÕs plan was expected to cut a
 whopping $593 billion in 7 years to furthermore produce an $8 billion
 surplus in 2002, most cuts are long term without a clear goal.
       Clinton is sometimes criticized by Republicans for unwillingness
 to compromise. He has used vetoes and stubborn negotiations to protect
 personal priorities like education, job training, and environmental
 programs, but Republicans have also tried using domination to force
 him to comply. GOP Presidential candidate Bob Dole said if Clinton was
 serious about the budget, "we probably could have had an agreement on
 New Years Day," 1996 (Hosansky 1449). "The President is sitting on his
 hands while the federal debt keeps going up and up and up into the
 stratosphere," said Congressman Jesse Helms, Rep -North Carolina. But
 one must remember that President Clinton does have somewhat of an
 overwhelming power in this debate that Republicans can do nothing
 about. He is the single person that can veto laws sent to him, and
 also has the power to call Congress back into session if he is unhappy
 with the current situation. This was President TrumanÕs "ace in the
 hole" back in 1948.
 A Neutral Proposal:
       As a neutral proposal, a group calling themselves the "Blue
 DogÕs" have won support for their budget from both Republicans and
 Democrats. The group also known as the Concord Coalition includes many
 conservative Democrats that want to see shallower budget cuts with
 less reform to entitlements. They also believe a tax cut should be
 delayed until the budget is balanced. The Coalition believes that by
 reforming entitlement policy, rethinking government size, changing
 taxation methods, and consuming less, our budget can be balanced (Rau
 Defending Deficits:
       In defense of deficits, some may argue that the danger of the
 current situation is highly over rated. A budget deal has always had
 less to do with economics than with politics and morality. Budget
 deficits donÕt crowd out private investment, government spending does,
 and a large surplus may not be a sign of strength for a country. Some
 say it is impossible for every country to run either a surplus or a
 deficit. What matters is that a country can service its debts (Defense
 68). During most of the 19th century, the United States borrowed from
 the world (a current-account deficit). By 1870, it was running a trade
 surplus, and by 1900 we had a current-account surplus. But in the
 early 2Oth century, the U.S. became the worldÕs largest net creditor,
 and by 1970 it peaked by finally running into deficit in 1970.
 Finally, 1980 brought a deficit so large, that the government was a
 net debtor again (Bottom Line 14).
 Current Reductions:
       One of the ways we are currently reducing the deficit includes
 the introduction of "means testing." This means that people would get
 entitlements based on need. The government already has reduced Social
 Security for modest income seniors age 70 and younger, but budget
 cutters want to broaden that idea (Henderson 60). There are 2 major
 problems with means testing. First, it is considered inherently
       Some might argue that a person might blow all of their income
 before the entitlement reductions come into place. Second, it might
 reduce the incentive to work and encourage people to hide their
 income. For instance, beneficiaries of Social Security, ages 62-64,
 lose $1.00 yearly in benefits for every $2.00 they earn in income or
 wages above $8,160 per year (Henderson 60). Some say increasing
 eligibility requirements would solve some problems, and propose
 raising the age of early retirement from 62 to 65, and standard
 retirement from 65 to 70. Another touchy subject in budget reduction
 is the argument that the poor are being left out of savings. According
 to the Clinton Administration, the GOP budget would cause a family
 with income of $13,325 per year to lose 11% of their income (Whitman
 42). United States Treasury Department studies say the bottom 1/5
 income families would have net tax increase of an average $12 to $26
 under the GOP plan. The top 1/5 income families would receive more
 than 60% of the tax relief. A HHS analysis states that the GOP plan
 would also boost child poverty rates from 14.5% to 16.1%, and poor
 families with children would loose 6% of their income.
       In the end, budget reduction is no easy task. "...fixing the
 National debt is like catching a train leaving the station. The longer
 we wait, the harder and farther we have to run," says the Concord
 Coalition (Rau M-1). "Both parties want the issue," instead of an
 agreement, said Representative Bill Orton. The center of attention for
 debate on budget cutting is politics, and whomever takes
 responsibility for reform gets left wide open to criticism. Although
 Congress and Clinton have spent the past year on debating the budget
 and the size of the Federal Government, most plans fall back on
 gimmicks, loopholes, and long-term plans. Even Democrats now agree to
 downsize the government, but the two parties disagree on how and
 where. As we trust our elected officials to make decisions in
 Washington on our behalf, we must show interest and aptitude on the
 end results. To accomplish a balanced budget deal, many suggest that
 we must not only balance spending, but reform entitlements, rethink
 government size, change tax methods, and depend less on Washington.
 Attendees of a conference on budget cutting in Jackson Hole, Wyoming
 suggested we deliver a budget that has a simple, quantifiable goal,
 that includes short term goals, and eliminated gimmicks. Countries
 like Sweden and Canada have successfully reformed fiscal policies.
 SwedenÕs government elected to abandon welfare, pensions, health
 insurance, unemployment programs, family assistance, and child
 allowances. Their deficit soon fell by 3.5% of GDP in one year alone
 (Urresta 51). SwedenÕs plan was three times as intense as CongressÕ
 current plan, while cutting spending in half the time.
       As for cuts, everyone must suffer. As entitlement debates
 continue, "the interests of older Americans are being protected at the
 expense of young people," says Neil Howe and Bill Strauss (Rau M- 1).
 Older Americans have good reason to protect programs that they have
 paid into for years, but those programs spend an overall per capita
 amount of 11 times as much on elderly than that spent on children
 altogether (Rau M-1). The youth are the future of America, and we
 should protect them too. Currently, poverty in US is 3 times as likely
 to affect the very young than the very old. By balancing the budget,
 "interest rates come down, the economy picks up - we will rebound,"
 says Representative James Greenwood (Cloud 3709), and everyone should
 be happy with that.
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