President Clinton has proposed a fiscal 2000 budget with hundreds of little ideas--and one big one, fixing Social Security. Even so, the President's millennium fiscal plan still suffers from a critical flaw: Rather than restraining the growth of federal programs for soon-to-be retired Baby Boomers, it merely devises ways to fund them.
So, Clinton winds up continuing the trend of making the federal spending plan a "gray budget." And an increasing share of federal largesse is shifted to the nation's oldest citizens. That crowds out other options, such as cutting taxes or investing more money to educate America's children to keep them competitive in the global workforce of the 21st century.
This trend is beginning to reach troubling proportions. Already, nearly one-third of all federal spending is earmarked for the elderly through Social Security, Medicare, and Medicaid. If measures aren't enacted now to curb the growth of these programs, when baby boomers retire a staggering four of every five dollars the federal government collects will go to such programs. Says Urban Institute senior fellow C. Eugene Steuerle: "We're building an inflexible government that will be largely devoted to consumption by the baby boomers."
In the short term, this burden won't be so apparent because it will be somewhat offset by substantial declines in interest payments on the $6 trillion national debt. If the government follows Clinton's plan to pay down $2 trillion in debt over 15 years, by 2004, annual interest payments will be $70 billion less than in 1998, the Congressional Budget Office predicts. That's just about the same amount by which Medicare will have increased. By 2004, Social Security will have risen $110 billion.
In Clinton's 2000 budget, more than $800 billion, or 41% of all federal spending, would go to fund just three programs in 2004: Social Security, Medicare, and the portion of Medicaid earmarked for the long-term care of the impoverished elderly. And that doesn't count an additional $700 billion Clinton wants to spend over the next 15 years to help finance a Medicare fix.
MANY FANS. By 2009, the beginning of the retirement wave for 76 million boomers, spending for those three programs will exceed $1.2 trillion, or about half of all government expenditures. This has put the gray budget on a trajectory to reach that 80% mark halfway through the next century.
What can be done? Social Security and Medicare are among the nation's most popular programs because everyone expects their due at retirement. That's why Clinton and most members of Congress would rather find ways to finance the programs than trim their benefits. And few dispute that needy seniors deserve government support. But should spending on the elderly be so high--now and in the next century--that it curbs investment in everything else society needs?
Clinton, like his recent predecessors, has decided that this choice is best made by his successors. He has proposed some modest Medicare fixes. But he has deferred any fundamental restructuring of the program until a Mar. 1 report from a national reform commission. Even if the panel agrees on a plan for fixing the program, it could be a long time before a partisan Congress can muster the will to make it law. Besides, GOP lawmakers have a different focus: huge tax cuts.
But the choices are clear: Future Social Security benefits will have to be trimmed. And, boomers will have to rely less on government benefits and more on their own bank accounts to pay for health care. As a result, they will need to take more responsibility for generating their savings for retirement.
The President deserves credit for focusing so much attention on Social Security's long-term solvency. But the real key for both Social Security and Medicare is finding how to scale them back so they provide a minimum, basic benefit for all Americans but still offer sufficient protections for those who need them the most. Until politicians of both parties tackle those issues, don't expect any real solutions to the single most important domestic issue facing Washington policymakers today.