Essay/Term paper: How money is used, raised, and wasted in washington

Essay, term paper, research paper:  Sociology Essays

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. Clinton"s 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 that"s 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 year"s 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 program"s 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 Clinton"s
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).
Clinton"s Budget:
Clinton"s 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
Republican"s 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 year"s 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 Clinton"s new budget. Among largest cuts within
Clinton"s 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 GOP"s $394 billion cut.
According to the Office of Management and Budget, the President"s 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 Clinton"s 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 Truman"s "ace in the hole" back in
1948.
A Neutral Proposal:
As a neutral proposal, a group calling themselves the "Blue Dog"s" 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 M-1).
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 don"t
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 world"s 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 unfair.
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.
Conclusion:
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. Sweden"s 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). Sweden"s plan was
three times as intense as Congress" 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.