Omaha World-Herald - No Leaders in Budget Dance

News Article

By:  Lee Terry
Date: March 28, 2011
Location: Unknown

By: Robynn Tysver

U.S. Rep. Steve King of Iowa puts the current political maneuvering in Washington in blunt terms: He and other Republicans want Democratic President Barack Obama to be the first to propose long-term solutions to the nation's budget woes.

King acknowledges a sentiment shared by many Midlands economists: that the only way to address the nation's rising debt is to overhaul popular entitlement programs such as Medicare, Medicaid and Social Security.

But he says Obama and his fellow Democrats should lead the charge and take the political flak, saying Republicans should not repeat what happened in 2005, when President George W. Bush proposed partly privatizing Social Security.

"I question whether it's politically wise for Republicans to step up with proposed solutions -- to be opposed in the same fashion that Bush was opposed by Democrats," King said.

Democrats also appear in no hurry to propose solutions that may be realistic but unpopular. Thus, a game of political brinkmanship is under way.

Republicans say Obama needs to lead on the matter, while Democrats fear that if Obama and their party go first, they will be hammered by the Republicans in the 2012 elections.

The stakes are high for the nation's fiscal health -- and the risks are just as high for politicians, who could face a backlash from an angry electorate for proposing new taxes or cutting popular benefits.

"With an election cycle and worrying about selling things to the constituents, there's a huge short-term gain for ignoring what's going on. And that creates a huge problem for us addressing the (long-term) issues," said Tom Root, a finance professor at Drake University in Des Moines.

The ongoing budget debate consuming Congress sounds as if serious spending cuts are on the table. House Republicans are pushing to slash $61 billion from the remaining six months of the fiscal year.

It's a lot of money, but the cuts would have little impact on the debt.

That's because they do not address the federal budget's long-term drivers: Social Security, Medicare, Medicaid and military spending. The deficit this year is expected to reach $1.6 trillion, increasing the nation's debt to an estimated $14 trillion.

Many in Congress, including most members of the Iowa and Nebraska delegations, acknowledge the political sensitivity of the situation.

U.S. Sen. Ben Nelson, a Nebraska Democrat, says there is a sense in Washington that Republicans and Democrats both will wait until after the 2012 elections to have a serious discussion about changes to the entitlement programs.

"Many people will be quite concerned talking about it. I know we have to deal with it. I'm prepared for the conversation to occur, and occur honestly," said Nelson, who has yet to announce a run for re-election.

One attempt at bipartisanship came recently from Sen. Mike Johanns, a Nebraska Republican, and Sen. Michael Bennet, a Colorado Democrat.

They wrote a letter to Obama on March 18, urging him to show leadership on a "comprehensive deficit reduction" package to curtail the growth of entitlements.

Sixty-four senators signed the letter -- 32 from each party, including Nelson and Tom Harkin, the Iowa Democrat.

Johanns said the idea is to bring all parties to the table in an effort to take partisan politics out of the equation.

"I don't think you have to lock yourself in a given position, but I do think we have to approach this with an open mind and look at all the alternatives," Johanns said.

Congress is consumed with a series of budget resolutions to trim the remainder of the nation's current fiscal budget, which runs through Sept. 30.

The debate, however, centers only on cuts from a small slice of the federal spending pie: discretionary nonmilitary spending.

That slice of the pie accounts for only about 14 percent of federal spending. In fact, that entire slice -- all federal spending on things like education, parks and housing assistance -- could be eliminated and the United States would still be spending beyond its means.

"It does not address the massive, massive problem that this country is facing with overall spending and deficits," Johanns said.

The only mathematical way to address the nation's debt is to tackle defense and entitlement spending. And the only way to do that is with benefit changes, an increase in taxes or a combination of both, said several Iowa and Nebraska economists.

"Those are the only solutions. Everything else is smoke and mirrors," said John Solow, an economist at the University of Iowa.

Military spending accounts for 22 percent of the budget, while Medicaid, Medicare and Social Security combined account for 40 percent.

Automatic spending set in law has grown dramatically over the past half-century with the creation of Medicare and Medicaid and rising life spans that allow people to draw Social Security for more years.

Social Security hit an unfortunate milestone last year when benefits paid out exceeded payroll taxes coming in. The federal government has begun borrowing money to pay off IOUs to the Social Security trust fund.

The public's support of the entitlement programs, which help to provide medical care and monthly stipends to the nation's elderly, makes any talk about trimming back those programs politically difficult.

"We're just a nation of special interests. You just hit on one of those special interests and you're … taking food from granny or destroying our national defense," said Ernie Goss, an economist at Creighton University in Omaha.

Several polls in the past year outline the difficulty of even having the debate. Polls show Americans believe the deficit and debt are major problems, but a majority do not want cuts to popular entitlements.

The most recent poll by Bloomberg, taken this month, showed that three-quarters of respondents objected to cutting Medicare.

Such polls give politicians little incentive to seriously address the rise of entitlements, said Steve Ellis of the national watchdog group Taxpayers for Common Sense.

"We're a part of the problem. We have the government we deserve. Essentially people have to look around and accept some personal responsibility -- and also recognize it's a deep hole and we've got to take our lumps."

No member of Congress from the Midlands has released detailed plans on how to deal with the rising cost of entitlements.

Harkin, the Iowa Democrat, is one of the few to propose a tax solution. He says that in addition to some budget cuts, President Bush's tax cuts of 2001 and 2003 need to be repealed for the nation's highest earners.

"We know this balanced approach can work. It's what we did in the 1990s under President Clinton," Harkin said.

The Midlands lawmakers are, however, united on one front: All say everything, including defense spending, should be discussed.

"No sacred cows," said Rep. Lee Terry, a Republican from Omaha.