Panel predicts U.S. to go broke after 2000

August 09, 1994|By Knight-Ridder News Service

WASHINGTON -- The nation is on an almost certain course to financial disaster, a panel of budget experts agreed yesterday.

The Bipartisan Commission on Entitlements and Tax Reform reported that unless the president and Congress do something to get a grip on spending for major social programs, the country could be bankrupt by early in the next century.

The problem is that the government is collecting about 19 percent of the gross domestic product in taxes and spending about 22 percent.

The commission -- including 11 Democrats and 11 Republicans from the House and the Senate and 10 private citizens -- was appointed by President Clinton as part of a deal with Sen. Bob Kerrey, D-Neb., when Mr. Kerrey delivered the vital 50th vote to save Mr. Clinton's first budget.

The group has until December to figure out what to do and pass on its recommendations to the president.

Among the problems identified by the commission yesterday:

* Social Security spending trends that could bankrupt the Social Security Trust Fund by 2029.

* Medicare spending that could use up all the money in the Medicare hospital fund by 2001.

* Spending on entitlements -- such as Social Security and Medicare -- that shrink to zero the money available for all other federal programs after paying interest on the federal debt.

* Continued reduction in the pool of money available in the United States to finance private economic development, forcing living standards down and weakening the nation's competitiveness in world markets.

The 32-member commission, which includes conservative and liberal economic policy experts from Congress and elsewhere, surprisingly was united in identifying the fiscal dilemmas confronting the nation.

The problem is that the possible answers are politically explosive, because they involve squeezing benefits for the powerful senior citizen lobby. How to get the elderly to agree to cuts is the issue.

"Our task is almost unbelievably difficult," said commission co-chairman Sen. John C. Danforth, R-Mo, who is leaving office this year. "It's easy to identify a problem; it's much harder to come up with a solution."

Former Commerce Secretary Peter G. Peterson, a commission member, said about $375 billion a year in federal benefits and tax breaks go to people whose incomes exceed the national median.

"If we're serious about cutting spending and benefits," he said, "a little more emphasis must be put on the billions of dollars that go to people who earn above the median."

Mr. Kerrey is running for re-election and is under fire from elderly groups in his state.

"The perception is that we'll cut Social Security," he said yesterday. "The reality is, we will not. The perception is, we're going to whack every entitlement program. The reality is, we will not."

He said some critics and editorialists have "demonized the entitlement programs" by suggesting that they are grossly wasteful and undeserved.

"Quite the contrary," Mr. Kerrey said. "The commission has acknowledged the good these programs have done. "But the trend lines [of spending] are unsustainable. Unless we act, the beneficiaries of Social Security and Medicare will also be at risk."

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