Time To Talk About Entitlements

June 11, 1994|By Nelson Schwartz | Nelson Schwartz,Contributing Writer

WASHINGTON -- Next week a bipartisan panel of politicians, economists and other experts will begin discussing a problem that the White House and Congress have spent a decade trying not to talk about: the surging growth of guaranteed benefits such as Social Security and Medicare -- called entitlements -- that are threatening to swallow up the entire budget.

Thirty years ago, entitlements made up little more than one-fifth of federal spending -- today they account for nearly half. This year, spending on entitlements will increase by $48 billion, even as members of both parties search for ways to cut the budget.

If the problem isn't dealt with now, said Sen. Bob Kerrey, the Nebraska Democrat who called for the creation of the panel and is now its chairman, the situation will worsen and drastic measures will be required.

Mark Weinberger, chief of staff for the new Bi-Partisan Commission on Entitlement and Tax Reform, warns that "if we wait 10 years, we will have to do something draconian."

Entitlements are benefits that the government is required by law to pay to millions of Americans each year. The payments cannot be altered without changing the law, and they grow automatically each year at a rate tied to inflation. Entitlements go into the budget with little debate and have long been an obstacle to serious deficit reduction.

The commission will meet here Monday for the first time. Meetings and hearings are scheduled throughout the summer. A final set of recommendations is to be delivered to the president by Dec. 15.

The panel, created by President Clinton in November, includes leading members of both parties, like the chairman of the Senate Finance Committee, Daniel Patrick Moynihan, a New York Democrat; and the chairman of the House Budget Committee, Martin Olav Sabo, a Minnesota Democrat. John C. Danforth, a Missouri Republican who is a senior member of the Senate Finance Committee, is the vice chairman.

But Washington has seen scores of prestigious panels come and go without making much impact, leaving little more than paperwork in their wake. Mr. Kerrey, who ran for president in 1992 and may run again, is hoping that his commission doesn't suffer the same fate.

"Our purpose is to change the law, not just make recommendations," Mr. Kerrey said yesterday.

Mr. Kerrey concedes that it will be difficult for members of Congress to talk about changes in normally untouchable programs such as Social Security, Medicare or federal retiree benefits, without enraging voters and spelling an end to their careers.

For years, Congress has treaded gingerly around the notion of cutting benefits. The commission's success or failure depends largely on how much Congress is willing to bet on the political appeal of deficit reduction.

Social Security, with a budget of $318 billion in 1994 -- Marylanders will receive about $5 billion in payments this year -- is the nation's largest entitlement program and a prime example of why entitlements are so hard to cut.

For politicians, Social Security has been called the third rail of American politics -- touch it and you die. After Paul Tsongas raised the issue of entitlement reform during the 1992 Democratic primaries, Mr. Clinton warned that Social Security would be in danger, and he handily defeated Mr. Tsongas. In the early 1980s, Democrats clobbered Ronald Reagan and the Republican Party with allegations that they intended to cut Social Security benefits. Few on Capitol Hill have forgotten.

"It's not an easy battle," said Mr. Kerrey, who is up for re-election this fall. "We must feel a sense of common purpose. If all we do is say, 'I have a political base that I want to keep happy today,' " little will be accomplished.

Studies show that rising life expectancies and a declining number of younger workers threaten the stability of the Social Security system. Although Social Security will soon generate huge surpluses, there is concern over how to cover the future cost of benefits for millions of baby boomers. In 1950, there were 7.3 workers for every retired person. By 2040, there will be just 2.8 workers for every retiree.

Finally, Mr. Kerrey and others worry that the borrowing required to pay for entitlements saps the economy and leaves less capital for the private sector. Big borrowing drives up interest rates, further undermining the economy.

Even if commission members can find consensus and make serious recommendations, a long fight lies ahead. Mr. Clinton would be in the politically unattractive position of having to push the commission's findings as he prepares to run for re-election in 1996. And Congress would have to agree to any change in benefits such as Social Security, which could create a political storm rivaling this year's battle over health care reform.

Nevertheless, the commission has created an outline circulated last week with possible targets for cuts or other changes. Among the options that have been discussed informally:

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