TWEEDLEDUM AND TWEEDLEDEE
Reprinted with permission from "Facing Facts" (Vol. II, No. 1, Jan. 19, 1996)
a publication of the
Concord Coalition, a bipartisan grassroots organization dedicated to fiscal responsibility
According to the popular media, Congress and the
White House are locked in a fateful struggle that will
alter the size and shape of government "more profoundly than anything since the New Deal." Hardly.
The central budget story of the past thirty years has
been the explosive rise in entitlements as a share of
federal expenditures and the national economy. Under
both budget strategies — Republican and Democratic
— that will be the story of the next thirty years as well.
Where's the Revolution?
To judge by the administration's apocalyptic rhetoric, you'd think that Congress was indeed poised to halt
the advancing entitlement juggernaut in its tracks. But
this simply isn't so — especially if we look beyond
Washington's myopic seven-year time horizon.
The proposals to "end welfare as we know it" are
small fiscal potatoes. Social Security — nearly twenty
times as large as AFDC — is off the table by bipartisan
consent. As for federal health benefits, the other big
cost center of the budget, the projected current-law
growth is so rapid that even the GOP's original (vetoed)
Balanced Budget Act would have left Medicare and
Medicaid on track to double as a share of GDP by 2020.
Since then, the proposed savings has dwindled — from
an initial (seven-year) figure of $359 billion in the BBA
to $253 billion in the GOP's January 6 proposal.
Let's cut to the bottom line. Under current law,
federal entitlement outlays are scheduled to climb from
10.9 percent of GDP in 1996 to 12.1 percent in 2002 and
14.6 percent in 2010 — then, as aging Aquarians swell
the benefit rolls, shoot up to 22.5 percent of GDP in
2030. If the administration's January 6 budget proposal
became law, entitlements would rise to 21.0 percent of
GDP by 2030. If the Republicans pull off their "revolution," entitlements (under the GOP's December 15
proposal, the most recent for which complete figures
are available) would still rise to 20.3 percent of GDP.
Yes, the GOP takes a slightly bolder stance on entitlements — and achieves slightly larger savings. It also
makes a nod at the long-term problem by proposing to
cap Medicare and Medicaid outlays after the year 2002.
February 1996 / Illinois Municipal Review / Page 25
Federal Outlays, Revenues, and Defecit as a Share of GDP, FY 1996-2030
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1996
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2002
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2010
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2020
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2030
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BASELINE
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Total Outlays
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21.8
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21.4
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24.2
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30.5
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38.8
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Discretionary
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7.5
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6.4
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6.4
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6.4
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6.4
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Entitlements
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10.9
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12.1
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14.6
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18.6
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22.5
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Net Interest
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3.3
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2.8
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3.0
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5.4
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9.9
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Revenues
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19.4
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19.1
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19.1
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19.1
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19.1
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Deficit
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-2.4
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-2.3
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-5.1
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-11.4
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-19.7
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ADMINISTRATION
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Total Outlays
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21.5
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19.2
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21.1
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25.7
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32.1
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Discretionary
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7.4
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5.2
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5.2
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5.2
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5.2
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Entitlements
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10.9
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11.5
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14.0
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17.6
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21.0
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Net Interest
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3.3
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2.5
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2.0
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2.9
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5.9
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Revenues
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19.4
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19.2
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19.2
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19.2
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19.2
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Deficit
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-2.1
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0.0
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-1.9
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-6.5
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-12.9
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CONGRESS
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Total Outlays
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21.5
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18.8
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20.6
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25.1
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31.3
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Discretionary
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7.3
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5.3
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5.3
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5.3
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5.3
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Entitlements
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10.9 .
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11.0
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13.4
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17.0
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20.3
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Net Interest
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3.3
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2.5
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1.9
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2.8
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5.8
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Revenues
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19.3
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18.8
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18.8
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18.8
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18.8
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Deficit
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-2.2
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0.0
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-1.8
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-6.3
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-12.5
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Note: All projections follow the CBO through 2002, projections after 2002 are consistent with the CBO economic scenario and were prepared by
Scott Nystrom using the long-term model developed by the Bipartisan Commission on Entitlement and Tax Reform. Projections for the
administration refer to its January 6 budget proposal, projections for Congress refer to its December 15 budget proposal.
Page 26 / Illinois Municipal Review / February 1996
We discount these caps because they are mere flat
declarations: The GOP has attempted neither to specify
the reforms nor build the consensus necessary to stay
under them. The best that might be said of the caps is
that they solve the Medicaid problem by punting it to
the states — which is to say that the only problem
Congress "solves" is the one it explicitly refuses to face.
A Bipartisan Problem
The long-term projections of entitlement spending
ought to be of grave concern to both parties. For Republicans, who claim to care so much about the size of
government, the concern is obvious. For Democrats, it
is less obvious — but no less real. Many may like (or at
least not mind) big government. But the reason they like
it is that it has enabled them to advance public purposes
that they will no longer be able to afford.
To spare entitlements, the administration has been
compelled to match the Republicans in gutting appropriated discretionary spending. True, the White
House's proposed seven-year savings is smaller. Its cuts
in the outyears, however, are as deep as the GOP's. The
fact that so much of the administration's discretionary
savings is backended (63 percent is to occur after the
next three elections) leads one to surmise the cuts are
never intended to happen. Still, if they are enacted,
discretionary spending in 2002 under the White House
plan would actually be slightly lower than under the
GOP plan.
Over the long run, this strategy is politically — and
economically — unsustainable. By the mid-2020s, entitlement outlays under the administration budget
would alone consume all federal revenues. Without
borrowing, not a dime would be available for national
defense — much less the domestice investment priorities the administration insists distinguish it from the
GOP.
A Check-Writing Machine?
The Washington spin doctors are right that there are
profound choices to be made on the budget. But they
are wrong that we are now debating them. The most
important choice of all is whether the federal government will be allowed to become a giant check-writing
machine whose sole purpose is to transfer a rising share
of middle-class worker income to middle-class retirees.
Come the Baby Boom's retirement, if we haven't
changed everyone's expectations starting now, either
those workers will be crushed or those retirees will see
the rug pulled out from under them at the last moment.
Let's face it: The task of balancing the budget by
2002 is a low-impact warm up compared to the ironman
challenge ahead. Until our leaders face up to this, any
talk of a revolution in government is a pretense — and
any promise of permanent budget balance a sham. •
All projections in this alert follow the CBO through 2002; projections after 2002 are consistent with the CBO economic scenario and
were prepared by Scott Nystrom using the long-term model developed by the Bipartisan Commission on Entitlement and Tax Reform.
February 1996 / Illinois Municipal Review / Page 27
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