Real Budget Choices Will Fall to Chelsea
The magic year in Washington is currently 2002. Yes, that's when Chelsea Clinton may graduate from college - but perhaps more important, both her father and Republicans in Congress say that's their target date for balancing the federal budget.
And how do many economists and budget experts react to this vow? A big fat yawn.
The reason: Washington's short-term budget plans may be ignoring the nation's long-term fiscal problems. Balancing the budget in 2002 isn't particularly crucial, according to this view. The real magic year should be 2008 or so, when spending trends might cause the deficit to reexplode (and Chelsea could be in line for her first PhD).
As important as the budget progress of recent years has been, "there is general recognition that [it] will only have been a temporary palliative if we do not solve the long-range challenges," said Joseph Stiglitz, chairman of President Clinton's Council of Economic Advisers, in a recent speech.
Despite the partisan argument that's roiled Capitol Hill since the defeat of the balanced-budget amendment, an agreement purporting to balance government books by 2002 is still likely. Quiet negotiations are continuing.
Such a pact would indeed represent a welcome step toward fiscal rectitude, in the eyes of many experts. That's so, even though many analysts are wary of aspects of the White House budget plan, such as its reliance on big cuts that won't take effect until after Mr. Clinton leaves office.
But after the deal has been struck, the long-term deficit outlook will almost certainly remain gloomy. Balancing the budget in 2002 is one thing. Keeping it in balance, or even in a state remotely resembling balance, is quite another.
THE difficulty is the baby boom. Near the end of the first decade of the 21st century, baby boomers will start retiring. They'll begin drawing money from Social Security, Medicare, and Medicaid, and the cost of these entitlements will then skyrocket.
The retirement of the boomers won't necessarily sweep over the nation like a tidal wave. "It will occur gradually, but as it does, the political dynamic will change," says Robert Reischauer, former director of the Congressional Budget Office and a current Brookings Institution scholar.
New figures in the Economic Report of the President put the problem in stark perspective. They predict that spending on entitlements will rise from 9 percent of gross national product today to 19 percent in 2050.
Clinton officials claim their plans will keep the budget in rough balance until 2020, giving politicians time to weigh entitlement fixes. But many analysts complain this prediction is unrealistic. Among other things, it assumes the economy won't stumble at all.
Instead, some experts see the deficit beginning to widen again by 2007 or so, unless something is done. And as CEA chair Joseph Stiglitz points out, "there is no consensus on long-term solutions to these challenges."
That doesn't mean that possible fixes aren't well known. For Social Security, they include investment of Social Security funds in stocks, or a decrease of cost-of-living hikes via a change in the Consumer Price Index. For Medicare, fixes might involve squeezing savings from managed-care programs or capping per-person spending.
Almost any change will be politically controversial, however. For Washington, thinking about 2002 represents long-term planning. Thinking about 2010 (when Chelsea might be eligible for partnership at a law firm) would be akin to starting work on the bridge to the 22nd century.