Facing the painful truth: the 1995 budget debate.

• Author: Bresler, Robert J.

IT IS LIKELY that the second half of 1995 will be consumed by the politics of the national budget. The Republicans have unveiled their proposals to produce a balanced budget by 2002, and the Democrats, who have given up on such a goal, are telling the nation how this will be done on the backs of the poor and the elderly.

The facts are well-known. In 1975, the Federal debt was 34.5% of the Gross Domestic Product (GDP); today, it has risen to 70% of GDP. Twenty years ago, net interest on the debt was about seven percent of the Federal budget; in Fiscal Year 1995, it will exceed 15%. As the size of the budget has grown, so has its composition. In the 1950s, 1960s, and early 1970s, most of the budget was devoted to national defense and discretionary domestic programs. Entitlements were a relatively small portion. For example, the Federal funds devoted to health (largely Medicare and Medicaid) constituted eight percent of the budget in 1975; today, that figure is 18% and threatening to rise dramatically. In 1975, net interest, health expenditures, and Social Security comprised around 34% of the Federal budget, as compared to 55% in FY95.

The politics of budget-cutting no longer is a matter of annual appropriations. The discretionary part of the budget that is controlled by the appropriations process has been capped since 1990 at approximately $500,000,000,000. Defense spending has seen a steady decline since 1989. Meanwhile, entitlements (Social Security, Medicare, Medicaid, food stamps, supplemental security income, farm price supports, veterans benefits, Federal retirement, unemployment insurance) continue to rise.

Cuts in such programs inevitably bring cries of outrage. In the spring of 1995, the Democrats protested that alterations of the school lunch program was tantamount to taking food from the mouths of babes. Yet, the cuts were minor, only a reduction in the rate of growth, and the program itself comprised a tiny fraction of the Federal budget.

Staring the Republican budget-cutters in the face is the simple fact that more than 75% of all the mandatory spending programs are not means-tested. In other words, it is the middle-class. not the poor, who are the major beneficiaries. This is particularly true for Social Security and Medicare--the two largest entitlements.

If Congress ever is to balance the budget, it would have to make substantial changes in entitlement programs. This will involve revising spending formulas and paring benefits...