The Color of Money
On Capitol Hill, forget saving for a rainy day -- It's spend, spend, spend!
It's becoming a yearly ritual: The Medicare and Social Security overseers hold up the red flags. The programs, they cry, are on the cusp of fiscal Armageddon. Medicare's problems, they said this year, will eventually overshadow even those of the Social Security program; in 2018, two years earlier than previously predicted, it'll go bust.
All the attention in the capital, though, is on spending, and spending more. This week, seniors face a deadline to sign up for the prescription drug plan, the largest expansion in the program's history. And for all the talk from Democrats and Republicans about restraining spending and fixing the entitlement programs with the baby boomers about to retire, most on Capitol Hill are more interested this election year in short-term victories: pet projects in their home districts paid for by Washington, and a bill to continue tax cuts through 2010 so that they expire under the next president. "They've been cutting taxes and adding spending," says Robert Bixby, head of the Concord Coalition, a nonpartisan fiscal restraint group. "That's the disconnect. There is just no relationship between spending policy and tax policy."
Last year, President Bush tried to jump-start the process to reform Social Security, lobbying for private retirement accounts. But the issue proved once again to be a third rail for politicians; Bush was quickly defeated. Social Security, the trustees said in their report this year, will become insolvent in 2040, one year earlier than previous forecasts. "It's time to set aside politics," the president said last week, "and restructure Social Security and Medicare."
Bush has sought a bipartisan commission to investigate the pension and healthcare questions facing aging Americans; he's asked Congress to slash $36 billion from Medicare during the next five years, too. Both proposals, though, have won virtually no support in Congress, and Bush has barely mentioned the commission since January. "They kick this down the road for a decade," says Douglas Holtz-Eakin, a former adviser to the president and former head of the Congressional Budget Office. "You can't make it to 2016 without touching it."
Democrats have lambasted the Medicare warnings as Republican scare tactics to press for privatized health insurance. "I'm sure it's the Chicken Little theory," says Rep. Pete Stark, a California Democrat. "If you get people scared enough, they'll do all sorts of things." Most liberals agree, up to a point, that the healthcare system is in dire straits. "The health system is in a crisis," says Jason Furman, a former economic adviser to President Clinton, "but different from a government-entitlement crisis."
Republicans, for their part, have recently rallied around the prescription drug plan, estimated to cost $724 billion over a decade, with leaders holding press conference after press conference touting it. For some conservatives, however, deep concerns persist. "This prescription drug benefit is going to eat us alive," says Rep. Jeff Flake, an Arizona Republican. "It makes you wonder where your party has gone. Thirty million seniors are now more dependent on the government." Adds Sen. Tom Coburn, an Oklahoma Republican: "The Medicare prescription drug bill is a mistake. It's an example of when you let political expediency take over long-term interests."
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