GOP Unveils Detailed Plans to Balance Budget

Congressional Republicans on Tuesday unveiled far-reaching plans to balance the federal budget for the first time in a quarter-century, as a House leader proposed scaling back future cost-of-living increases for Social Security beneficiaries.

Senate Republicans released a detailed blueprint for eliminating the deficit by the year 2002 by achieving $961 billion in savings with the help of slower growth in Medicare and Medicaid, elimination of many government programs and cutbacks in others.

“I’m thrilled today to present the first balanced budget in about 25 years,” declared Sen. Pete V. Domenici (R-N.M.), chairman of the Senate Budget Committee. He quoted Thomas Jefferson as saying that it is immoral “to saddle posterity with our debt.”

Later in the day, Rep. John R. Kasich (R-Ohio), chairman of the House Budget Committee, in a preview of the budget that he will put before his committee today, proposed restricting Social Security and other federal inflation allowances to six-tenths of a percentage point below the consumer price index, starting in 1999.

The proposal, following promises by leading Republicans that Social Security would not be used for budget savings, is certain to spark debate over treatment of the elderly in the Republican budget plans, which also count on spending controls for Medicare and Medicaid.

Details of the Senate and House proposals came as Republicans in Congress began what is expected to be a huge budget battle aimed at putting their imprint on an extraordinary overhaul of government. Tax cuts, program eliminations and policies affecting the poor, near-poor, students and farmers all are being pulled into the growing debate.

Kasich’s bill is broadly similar to Domenici’s, calling for $1.4 trillion in deficit reduction over seven years, but with several significant differences. It makes room for a $350-billion tax cut over seven years and includes the proposal that would scale back cost-of-living increases for Social Security recipients and beneficiaries of other federal pensions.

The Senate proposal also envisions a restriction on cost-of-living increases, but Domenici’s plan recommends a smaller two-tenths of a percentage point decrease. That figure is based on Labor Department findings that the CPI overstates inflation by at least that much. Changing the way inflation benefits are measured would save money not only in Social Security but in civilian and military pensions. The change would not take effect until 1999. Kasich said that it would save the government more than $30 billion over seven years.

Under the budget manifesto unveiled by Domenici, defense and Social Security are essentially left alone. Domenici also made a point of noting that the school lunch program would be sheltered, along with many law enforcement activities.

Otherwise, the budget knife would be felt throughout much of the federal landscape, in ways large and small, both highly visible to the public and subtle.

The Commerce Department would be eliminated, along with 100 other federal agencies, programs and commissions.

In some cases, functions would be shifted to the private sector, such as the air traffic control system and the college loan program.

Pay would be frozen for federal judges and members of Congress. Senate staff would be reduced. The White House budget would be cut by one-fourth. And parking fees would be charged at federal buildings. Spending on agricultural subsidies, the environment, transportation, community development and education and training would decline.

Efforts to restrict the rapid growth of federal health care spending have dominated much of the recent debate, and the controversy is likely to continue as Republicans push forward with their budget plans.

However, in light of projections that Medicare’s key trust fund will go bankrupt in 2002, Domenici proposed a new commission to come up with a long-term survival plan for the beleaguered health insurance program.

Medicaid, which provides health care to the poor, would be shifted to the states.

Republicans continue to have deep differences over the priority of tax cuts, with House leaders determined to include tax relief for families and businesses in an overall budget plan. Domenici, by contrast, has made it clear that conquering the deficit is his paramount goal and that tax cuts might follow only then.

On Tuesday, however, Domenici told colleagues that a bona fide plan to balance the budget would yield a $170-billion economic bonus that could be used later for tax cuts, provided the plan is endorsed by the Congressional Budget Office.

“My own theory is that you ought to give it back to the taxpayers,” he said of the presumed windfall, which would come in the form of lower interest rates that, among other things, would ease the government’s debt payments.

Budget deficits, projected to run in the range of $200 billion a year, would decline by about $30 billion a year under the Senate plan. Overall federal spending actually would increase at a 3% pace for the next several years. Yet that rate of increase--slower than the current 5% rate--would lead to a balanced budget, because of normal economic growth, according to the committee.

Senate Democrats on Tuesday expressed unhappiness with much of the Republican plan, scolding Domenici for using the surplus in Social Security in his budget calculations (a routine procedure) and squeezing too hard on programs for the needy. They also complained of being left in the dark until the last minute.

The House budget calls for Medicare savings of somewhat more than the $256 billion over seven years that Domenici’s plan assumes. Kasich emphasized that spending would continue to increase under his budget and that the plan would simply curb the rate of growth. But he acknowledged that his plan would hold the rate of growth to about $280 billion less than would be spent if the program were unchanged. He also said that the budget would reduce projected spending increases for Medicaid by about $184 billion over seven years.

He gave few details of how he would propose making those savings but said that his committee would detail three options, including changes in the existing Medicare program and a new system of direct payments to health care plans chosen by beneficiaries.

In other departures from the Senate blueprint, Kasich’s budget assumes savings from:

* The abolition of three major Cabinet departments: Commerce, Energy and Education. Domenici proposed eliminating only Commerce.

* Turning Medicaid into a block grant, like Domenici did, but limiting the increase to 4% rather than 5%.

* Turning the Corporation for Public Broadcasting over to the private sector.

* Eliminating funding for the National Endowments for the Arts and Humanities. Domenici proposed cutting the endowments in half.

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Domenici’s Attack on Deficit

Here are some of the large changes in the fiscal 1996 budget proposed by Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) to take effect over seven years:

Deficit: Projects a deficit of $157 billion for fiscal 1996 starting Oct. 1, becoming a $2 billion surplus in fiscal 2002.

Foreign: Cuts spending on international programs by $18 billion below current spending.

Medicaid: Slows Medicaid for the poor, spending $780 billion, $175 billion less than needed to keep up with inflation.

Medicare: Slows Medicare for the elderly, spending $1.6 trillion, $255 billion less than what is projected as necessary to keep up with medical inflation and increased numbers of elderly.

Transit: Cuts spending on Amtrak, the federal-aid highway program, mass transit assistance, the Federal Aviation Administration and other transportation programs by $51 billion below current levels.

Defense: Keeps peacetime military spending at the level set by President Clinton, up $24.5 billion over current levels.

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THE SAVINGS

Amount of reduction of deficit each year to 2002, in billions of dollars: 1996: $40 1997: $86 1998: $112 1999: $137 2000: $162 2001: $195 2002: $225 ***

Total: $806 billion over the seven years

Plus: $155 billion in savings as government pays less for debt service

Grand total: $961 billion

Sources: Reuters, Times Washington Bureau