The Budget Battle

Expect sharp rhetoric this week as both Houses of Congress work through their budget bills. Republicans and Democrats are engaged in a shouting match over who can best bolster the economy, Social Security, and Medicare.

The debate sharpened last week when President Clinton effectively pulled the rug out from under Medicare reform.

The 17-member National Bipartisan Commission on the Future of Medicare was chaired by the president's friend and fellow New Democrat, Sen. John Breaux of Louisiana. He needed one more vote for the required supermajority to approve the commission's sensible reform proposal, based on the benefits provided to federal employees. But Mr. Clinton was silent. His appointees on the panel all voted no.

While insisting all along that he supported the commission's work, the president's actions tell another story. He proposes, instead, extending the current program's solvency by transferring 15 percent of future federal surpluses into the Medicare trust fund, now forecast to go bankrupt around 2008.

Both the Congressional Budget Office and the watchdog General Accounting Office criticize the Clinton proposal. Republicans and others protest correctly that the president would hand Medicare a wad of IOUs and then claim the fund is healthier. He would set a bad precedent by putting general-fund money into a program meant to pay for itself.

In addition, the president wants to expand Medicare to pay for prescription drugs. That sounds good to many health-care activists. But when Medicare faces the prospect of not being able to pay for current benefits, how can it possibly pay for more - especially absent reform?

In fact it can't without an increase in payroll taxes. The president knows better than to propose that, so he proposes using surplus income-tax revenue instead.

The dispute is closely linked to the larger congressional budget debate. The White House and Democrats berate Republicans for not "guaranteeing" to "extend Medicare's solvency." But GOP budgeteers don't ignore the issue: The Senate budget plan sets aside $133 billion in future non-Social Security surpluses that could be used to fund a transition to a new Medicare. The House likewise sets aside $97 billion.

The GOP budget proposals are easy targets: While the president can propose anything he wants, current law requires the Budget Committees to stay within spending caps the White House and Congress agreed to in 1997. Those caps have bound increasingly tightly.

The president wants to set aside 62 percent of the surplus for Social Security. But his budget proposal would spend surplus Social Security funds on other programs. The GOP counterproposal would set aside all Social Security taxes in a "lockbox" that couldn't be spent on anything else.

The GOP budget has its own complications. It would spend more for education and defense. Under the caps, that means cutting elsewhere. Republicans would then use part of the non-Social Security surplus for an unspecified $800 billion tax cut over 10 years.

Clinton and the Democrats say the cuts in other programs will be too deep and the tax cuts too high. They want to use more of the surplus to pay down the debt. Even many Republicans agree it will be tough to stay under the limits.

If the committee votes are any indication, the budget resolutions will likely pass both houses on party-line votes: The budget resolution doesn't require the president's signature, and it can't be filibustered in the Senate.

The final budget resolution is only a "guideline" for the appropriations committees, to which the battle will then shift. Hard choices will have to be made over what to cut.

Both sides hope for good news from summer fiscal projections by the Congressional Budget Office and the Office of Management and Budget. Many believe those projections will show even higher surpluses than currently predicted, which could grease the wheels of compromise. Even so, Congress must stay close to the spending caps or there will be no future surpluses to argue over.

Meanwhile, Senator Breaux will take his Medicare reform proposal to the Senate Finance Committee, which will probably pass it. The president says he'll work with congressional Democrats to come up with an alternative. What they come up with will reveal whether Clinton wants real reform, or just an issue for the 2000 campaign.

The Democrats now claim that by not putting some of the surplus into the Medicare fund, the GOP is hurting Medicare. Not so. What will hurt Medicare is indulging the fantasy that nothing else need be done to fix it.