YET ANOTHER BUDGET BETRAYAL

Henwood, Doug

Yet Another BUDGET BETRAYAL BY DOUG HENWOOD During the great 1995 government shutdown, the Financial Times editorialized that "Mr. Clinton has at last hit on an effective strategy for taking on...

...But they are hardly giddy...
...Measured as a share of the Gross Domestic Product (GDP), most major budget categories show differences only in the hundredths of a percentage point...
...The economy has performed well enough over the last year or two to render old budget projections obsolete...
...These charges enabled liberal Clinton apologists—and there are a few of them left—to claim that he was protecting domestic spending, particularly education, Medicare, and environmental programs against the depredations of Republicans...
...The Republicans can rightly claim to have achieved most of the fiscal promises in the Contract with America, while Clinton can claim to have protected some mainly symbolic programs...
...government will have cut its share of GDP by more than 4 percentage points since 1985, the biggest peacetime shift in the history of reliable numbers...
...Isn't a GDP of nearly $8 trilliga enough...
...Only Medicare numbers were available at press time, so let's look at those...
...A deficit of principle...
...The Carter-Reagan buildup boosted military spending from 4.7 percent of GDP in 1978 to 6.2 percent in 1985...
...It's shrunk to 3.4 percent in 1997, and will shrink further to 2.7 percent in 2002, the lowest since the 1940s, when it was 1,7 percent...
...And second, earn maximum political capital by battling in a principled manner over the details...
...In dollar terms, the military takes no visible hits, and it will remain grotesquely large in 2002...
...Overall spending would have declined to the lowest level since 1966...
...A press release from the House Republican Conference says that the balanced-budget plan of 1997 marked the fulfillment of the Contract with America...
...Medicare's current level of services—given rising prices and needs— would require spending a bit more than $300 billion in 2002, or 3 percent of GDP...
...Instead, the budget deal aims to spend $251 billion (2.5 percent of GDP), an 18 percent cut...
...But it must be acknowledged that about three-quarters of the oecline in the government's share of GDP between 1985 and 2002 will be accounted for by the Pentagon...
...The only decent thing he did, in fiscal terms, was to raise taxes on the richest 1 percent of the population, something he subsequently apologized for...
...None of this even begins to offset the damage done by welfare "reform" alone...
...In its quest for balance by 2002, Clinton's 1997 budget topped 1996's in tightness, with federal investment in civilian infrastructure slated to fall to levels not seen since the early 1960s...
...Clinton, or whatever copywriter was speaking in his name, did brag about helping states "build more prisons...
...it's unlikely that the bond market would have become the arbiter of almost all public policy in the United States if the national debt had not tripled during the Reagan-Bush years...
...Had his 1996 budget been adopted as proposed, spending on education in 2002 would have declined to half what it was when Reagan took office...
...We don't know exactly what form the tax breaks will take, but studies of earlier proposals have shown consistently that their lush benefits accrue to the very rjta est—the 1 percent of households witifl comes over $250,000...
...Though Clintonites blame the 1994 election for his austere turn, his budgets were tight from the first, and each has gotten successively tighter...
...And what would rise...
...There are many horrors included under budgetary categories like "environment," "community development," "transportation," and "investment...
...Though Clinton also speaks of universalizing access to college, Mortenson's numbers show that a person from the richest one-quarter of the U.S...
...They do not say that Clinton's budget would have done almost exactly the same...
...Both budgets would reach balance in 2002...
...Clinton has at last hit on an effective strategy for taking on the Republicans over the budget...
...Spending on conservation, pollution control, agricultural research, energy research, public housing, food stamps, income security, and community and regional development would all have fallen relative to GDP...
...But there's no way we can clean the air, rebuild schools, or keep the poor from disease and early death with public spending as tight as Clinton, Gingrich, Armey, Ka-sich, and Domenici plan...
...This would mean base closures, higher unemployment, and community dislocations, while preserving big contracts for big contractors...
...And, over time, building up big debts only increases the political power of the creditor class...
...they were established long ago...
...Though projections for long-term growth remain largely unchanged, the new budget predicts that the good times of 1996 and 1997 will continue to roll through 1998 and 1999...
...But the actual numbers were stringent...
...The President boasts about his education budget but the expansion in education tax credits is generally regressive (the richer you are, the bigger your credit), and is no help to the poor who pay little income tax...
...Despite saying that we need to "invest in education and training, the environment, science and technology, [and] law enforcement," spending on all categories but the last was projected to fall as a percentage of GDP...
...The best you can say is, "it could have been worse...
...Nor do I want to argue that running big deficits year in, year out is a good thing-far from it...
...All of these are skewed, some of them heavily, to the rich...
...How this will play out over the longer term is a question not being asked in this smug bull-market environment, but it deserves asking...
...Spending on "pollution control and abatement" would sink to the lowest level since 1972...
...Unlike his Democratic predecessors Dukakis and Mondale, he said Doug Henwood is editor of the Left Business Observer and author of the newly published "WallStreet" (Verso...
...That may be—or it may be that Clinton doesn't care, since he'll be long gone by 2002...
...The most austere lines of the budget agreement are those covering Medicare and Medicaid...
...the budget deal proposes that both come in at 18.9 percent...
...The Republican right and what there is of the Democratic left are unhappy with the way the Congressional leadership and the White House are merging into a coalition government of the status-quo party...
...A bigger GDP obviously means more money for the government to play with...
...there's no urgency to do anything now...
...Clinton vetoed six of the Contract's tax promises in 1995, only to sign them in 1996, and most of the unfulfilled promises are embodied in the 1997 budget deal: lower taxes on capital gains, lower estate taxes, and "super-IRA" tax-sheltered retirement accounts...
...little about the deficit, and kept the hair shirt in the closet...
...Conservative critics of the deal said the economic assumptions were too optimistic...
...If those numbers hold, then the U.S...
...This will mean reimbursement and service cuts, details to be announced over the summer...
...They make a persuasive case...
...The President's former pollster, Stanley Greenberg, did a post-election survey demonstrating that Clinton won reelection on such an agenda...
...Idon't mean to argue that public spending in itself is necessarily a good thing...
...national economic and technological strategy since the 1950s...
...According to Tom Morten-son, the Iowa City-based publisher of Postsecondary Education Opportunity, if the Pell Grant covered the same share of private-college charges that it covered in 1979, it would have to be raised by more than $4,000...
...While it's nice to see a $300 increase in Pell Grants to low-income students, this can't even begin to offset the inflation in college tuition we've seen over the last twenty years...
...Austerity won the day when Clinton allowed the complexities of fiscal politics to get condensed into a single number, the deficit...
...This looks like a dismantling of military Keynesianism, one of the pillars of U.S...
...The prose introduction to the budget document he submitted in early 1996 was full of elevated rhetoric...
...Hard-right Republicans want deeper tax and spending cuts, and House Minority Leader Richard Gephardt, who would like to move into the White House, denounced the deal as "a budget of many deficits...
...Tax cuts are structured so that thej don't cause much budgetary havoc at first, the real losses to the Treasury are five or six years away...
...in 1979, the figure was "just" four times...
...And many Beltway critics denounced the agreement for not addressing Social Security, which is always and wrongly painted as on the verge of crisis...
...In a budget sent to Congress in early 1993, only months after his inauguration, Clinton proposed a deficit reduction totaling 2.5 percent of the GDP—with a revenue increase of 1 percent, and spending cuts of 1.5 percent...
...The budgeteers of the May bipartisan deal found a way to accommodate the Republicans' unsatisfied lust for tax cuts without swelling the deficit or forcing cuts beyond those Clinton already had planned in his February budget...
...This quashed questions about what government should do and who should pay for it under the boot of "we just don't have the money...
...The big numbers—total revenues, total spending, and the deficit—in both documents are nearly identical...
...Subsidies to business, known in budget lingo as "advancement of commerce...
...Even if the much-predicted crisis does materialize, it won't show up for decades...
...on federally sponsored research and development, to the lowest level in history...
...But those essential facts aren't the product of the May 1997 deal...
...It was deadly accurate then, and it applies equally to the balanced-budget deal that Clinton recently consummated with the Republican Congressional leadership...
...Merely to keep up with inflation, it would have to rise by more than $1,200...
...and, worst of all, a deficit of dollars...
...The budget proposed in early 1994 was even more austere...
...population is ten times more likely to get a bachelor's degree than one from the poorest quarter...
...the growth rate assumed for the five-year budget plan is a laggard 2.1 percent...
...Even the more popu!| expanded IRA is likely to leave the bdf torn two-thirds of taxpayers essentially un-blessed by its benefits...
...But once he was elected, he rejected expanded government spending in favor of budget-balancing...
...As a result, the budget agreement projects higher revenues and expenditures than Clinton proposed three months before— with enough room for an $85 billion tax cut...
...But two months after the election, Clinton proposed a budget that would have shrunk spending (relative to GDP) on education, the environment, Social Security, and what the budget calls "income security...
...Some assistance to legal immigrants is to be restored, other social spending is goosed a bit, a few more kids will be immunized— but these restorations are tiny in the context of the budget (0.4 percent of total spending, and 0.1 percent of GDP...
...The budget deal will cut services to the poor and the middle class, and give a big tax break mainly to the rich—yet another chapter in the state-sponsored upward redistribution of income...
...From a progressive viewpoint, the best thing about the newer, rosier scenario is that the devious scheme to adjust the Consumer Price Index so that it reflects a lower rate of inflation (thereby covertly raising taxes and cutting Social Security) has been shelved...
...Some sources say that the Administration doesn't understand what it's agreed to...
...Borrowing money from rich people and paying them interest for the privilege is a cowardly substitute for taxing them...
...But when they kick in, they will almost certainly result in bigger deficits or sharp program cuts...
...A study of an earlier version of the Republicans' tax scheme by Citizens for Tax Justice estimated that by the time it was fully phased in, the bottom 80 percent of the population would get just a quarter of the benefits, while the top 5 percent would get more than half...
...Clinton claims credit for having "protected" certain cherished programs...
...Republicans have gotten pledges for big tax cuts, most of them for the rich...
...Not every sewer for a strip mall, not every interstate highway, not every massive dam and irrigation scheme is necessary or justifiable...
...Clinton was elected in 1992 in part on promises of public investment in America and its people...
...a deficit of fairness...
...a deficit of justice...
...Clinton proposed expenditures equal to 18.9 percent of GDP, with receipts at 19.0 percent...
...Federal investment—the centerpiece of his 1992 economic platform—would have fallen to the lowest level since 1950, measured as a share of GDP (the measure in all subsequent references...
...Only the fattefl percent of all estates are likely to berjH from what Republicans ghoulishly wk "death tax relief...
...A summary of the budget deal put out by the House Budget Committee's Republican staff brags that under the agreement, total government spending will decline to 18.9 percent of GDP in 2002, which, they helpfully explain, is "the first time since 1974—the year that Patty Hearst was kidnapped and Hank Aaron hit his 715th home run—that government will have spent less than 20 percent of the nation's economic resources...
...In February, Clinton, the sworn protector of Medicare, proposed spending just $263 billion, or 0.1 percent of GDP more than the budget deal imagines...
...Despite the political and media fuss, the numbers published by the House Budget Committee look remarkably similar to those the President proposed in his own budget in February...
...First, cede the most important principles to your opponents...
...And the Administration seems poised to shift military spending away from bases and manpower and toward "modernization...

Vol. 61 • July 1997 • No. 7


 
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