Darman Likens Long-Term Federal Commitments to ‘Hidden Pac-Men’

The Bush Administration warned Monday that the federal government is amassing a mountain of long-term budget commitments that is threatening to usurp tax dollars in coming years and is mortgaging the future of generations of taxpayers.

The list includes everything from federal loan guarantees and mandatory medical benefits to commitments for cleaning up nuclear weapons plants and for bailing out ailing financial institutions, as Washington is doing now with insolvent savings and loan associations.

Unless something is done soon, Budget Director Richard G. Darman said, the cost of meeting these obligations--currently almost $700 billion a year--will balloon dramatically. He said it could take $200 billion over 30 years to fulfill environmental cleanup commitments alone.

Consuming Resources

In an introduction to the fiscal 1991 budget Monday, Darman likened these obligations to “hidden Pac-Men”--an allusion to Pac-Man, an electronic game in which images of large pie-shaped heads appear to gobble up rows of dots across a screen.

In this case, he said, the Pac-Men were “waiting to spring forward and consume another line of resource ‘dots’ in the budget maze.” Not only that, he warned, the picture may well prove even bleaker than he outlined. “Many of the problems are not fully visible,” he declared.

The listing--which Darman described as “intimidating”--marked the first time that the Office of Management and Budget has tried to calculate the size of this long-term credit overhang and has called attention to the problem so pointedly.

To head off the long-range problem, Darman proposed a series of solutions that are guaranteed to be unpopular--cutting back modestly on mandatory spending programs and depositing part of the current surplus in the Social Security trust fund into a special kitty.

The budget chief told reporters separately that the obligations “would not be manageable” if authorities “just were complacent . . . and waited for the bills to come due (like) a giant balloon payment on a mortgage.”

But, he added, “if . . . we were to approach this the way you actually do with a normal mortgage--and each year you make a sensible, incremental adjustment so . . . you don’t have this impossible balloon . . . then it is manageable.”

Darman cited five categories of long-term spending commitments:

--Mandatory programs, such as Social Security, welfare, veterans’ pensions, Medicare and Medicaid, that require the government to pay benefits to everyone who is entitled to them, no matter how much actually is available in the budget.

He estimated that without some tightening or cutbacks, spending for these could increase by more than $200 million a month between 1990 and 1995, pushing them to more than half the entire federal budget, up from 34% in 1970.

--Interest on the national debt, which has risen to $176 billion this year as the government continues to borrow heavily to finance its spending and interest rates remains high. The amount of federal debt held by the public now stands at $2.2 trillion--triple that of 1980.

--Deficiencies in federal annuity programs, such as Social Security and federal pension and disability programs, many of which are building up obligations that far exceed the funds on tap to pay them, particularly as the baby boom generation nears retirement age.

--Federal credit programs that provide U.S.-guaranteed or -insured loans to home buyers, farmers, students and businessmen, which are absorbing a growing share of the budget. The volume of defaults and insurance losses is mushrooming--as in the S&L; crisis of last year.

--Commitments to clean up environmental contamination from past practices at federal nuclear and hazardous waste facilities, which are expected to cost between $140 billion and $200 billion over the next 30 years.

Effort Called ‘Useful’

Reaction to the warning was mixed. Charles L. Schultze, a Democratic budget expert, said the budget director’s effort to underscore the problem probably was “useful,” but argued that the Republican administrations since 1981 have “added tremendously” to the total.

Schultze, now at the Brookings Institution, said President Bush’s refusal to consider raising taxes was impeding any effort to solve the problem. “All this ‘Read My Lips--No New Taxes’ business makes it impossible to handle,” Schultze contended.

John Makin, budget analyst at the conservative-oriented American Enterprise Institute, noted ironically that the warning-call sounded like the one that Democrats were raising during the 1988 presidential campaign, but added: “It’s all true--those guarantees are costly.”

“I think that what he (Darman) is really saying is that we’re going to have to scale back these commitments, unless we want to raise taxes to relieve the situation,” Makin said. “If we perform as we always have, the problem will balloon dramatically.”