Budget Deal Is Historic for Its Blatancy

A “historic breakthrough” says President Clinton. “The completion of the contract with America,” boasts House Speaker Newt Gingrich. With the political leaders of both parties out hyping the sizzle of the budget accord, let’s take a close look at the size of the steak and how it is cooked.

The agreement’s reality is a long remove from the politicians’ rhetoric. It isn’t really about balancing the budget. Economic growth and the tax increases in President’s Clinton’s first budget plan essentially accomplished that. This year’s deficit--now projected at $70 billion to $75 billion, less than 1% of our gross national product--is far below the estimating error of the five-year projections. Healthy growth will push the budget into surplus; slow growth will push the deficit up. But that won’t matter; the U.S. already has a smaller deficit burden than any other major industrial country. The real deficit concern, how to finance medical care for the boomers when they retire, is put off to another day.

The budget agreement also isn’t about generating growth. Whatever benefit in lower interest rates that comes from deficit reduction has already been banked. The actions of the Federal Reserve Board will have greater effect on the economy.

The agreement is really about distribution of pain and gain--who pays and who profits. And it is about whether the wealthiest nation in the world will invest in its future. On these vital questions, it leaves much to be desired. Not surprisingly, the wealthy who pay for the political parties rake in the most. Although the battles are yet to be waged, President Clinton clearly has signed off on Republican demands for cuts in capital gains and estate taxes. Citizens for Tax Justice estimates that 85% of the benefits of capital gains tax cuts will go to the richest 5% of American households. The wealthiest 1% of American families will reap the benefits of estate tax cuts. Affluent Americans already have the lightest tax burden of the wealthy of any industrial nation. Inequality is at record extremes, and this agreement will make it worse, not better.

There is some relief for low income and poor Americans, but not much. Funding for Head Start will go up, but the U.S. still will do less to lift poor children from poverty than any other industrial nation. Pell university grants for poor students will be increased, but not enough to bring the grants back to their 1970s value. Parents will get help with college tuition, but those better able to afford college will gain more than those less able to do so. (And experts predict that the benefit of the tax break is likely to be erased as colleges respond by hiking their fees.)

There is some remedy for the worst grotesqueries in last fall’s welfare repeal, but not nearly enough to make up for the damage wreaked. The agreement will provide some health care to some poor children, but half or more will remain without. With capital gains and estate tax cuts taking priority, the children’s tax credit is likely to end up more symbol than substance.

At the same time, the weakest will be hurt the most by the cuts in Medicare and Medicaid and reductions in housing, urban programs and other domestic programs. Despite last year’s campaign mantra, the cuts projected for Medicare and Medicaid ($131 billion) seem shamelessly linked to the size of the tax breaks ($135 billion) that go disproportionately to the wealthy.

The agreement’s major effect is to make it far more difficult for the government to address any of our major problems. The cities will be afforded no relief. Investment in areas vital to our future--housing, training, civilian research and development, mass transit and infrastructure--is slated to go down, not up. The independent General Accounting Office estimates it would take about $112 billion to bring public schools up to code. Yet the agreement will torpedo even the paltry $5-billion program to help rebuild schools that the president says are “literally falling down.” The president says that workers displaced by the global economy need retraining and education, not protection. But this agreement ensures that they won’t get much of either from the federal government.

President Clinton came to office pledging to “invest in the future.” Now he settles for the “balanced values” of the bipartisan center. That coalition wrestles with phantom concerns and ignores real ones. It offers more benefits to the wealthy who finance campaigns than to the poor who don’t vote. It extends government’s mandate even as it undermines government’s ability to fulfill it. It presents itself as revolutionary but locks in the status quo. And if we are lucky, it represents the past, and not the future.