disciplines. This has resulted in an inequitable outcome that serves to the advantage
of well-established entitlement programs and at the expense of other budget categories.
Accordingly, as the deficit has been reduced, health entitlements have continued
unchecked, while spending reductions have been applied to vulnerable discretionary
domestic programs.
Effectively exempted from budget scrutiny, Medicare and Medicaid have
averaged 10 percent growth in recent years. Largely for political purposes (e.g., note
the “Medi-scare” tactics that were at play during the current campaign), serious
attempts to restrain spending on entitlements have been nonexistent or unsuccessful.
For their part, Democrats have offered modest reforms or cost-shifting initiatives
that do little to address the impending shortfall in the Medicare program. In fact,
President Clinton vetoed the Republican budget, specifically citing Medicare and
Medicaid in his rationale. (The so-called “blue dog” Democratic budget is a notable
exception to the approach taken by most Democrats on the issue of health
entitlements.) Republicans did make a brave attempt to reduce the growth rate in
Medicare and Medicaid, but they foolishly tied their health reforms to a budget that
also included huge tax breaks. Consequently, they have been placed on the defensive,
trying to explain that the Medicare cuts are unrelated to the tax cuts—a debate they
are not winning.
The bottom line, however, is that as the President and Congress proceed to
implement a six- or seven-year balanced budget plan, growth in programs such as
Medicare and Medicaid inevitably will come at the expense of other priorities. This
already is evident in the 1996 budget. Clinton vetoed the reconciliation bill, thus
saving Medicare from reforms projected to save $270 billion over seven years. But
Republicans were successful in shrinking domestic discretionary spending by nearly
$23 billion—a one-year savings that will produce more than $ 100 billion savings over
a seven-year period. By protecting Medicare, Clinton has in a very real sense facilitated
the reduction in funding for housing, human services, urban development and other
domestic needs. To some extent, cuts in these programs will now transfer back to
state and local governments the responsibility for funding assistance in these areas.
By necessity, Clinton will have to embrace reform in the health entitlement
arena. Cost trends in these programs are unsustainable. In fact, the Medicare trustees
reported in June that the Medicare trust fund will be insolvent by the year 2001.
Medicaid’s financial problems will similarly need serious attention in the coming years.
As the federal government reduces funding for these two health programs, it is
reasonable to anticipate increased demand on state and local governments to help
preserve a safety net for low-income and senior citizen populations.
A shift toward state control also is occurring in the arena of welfare. After vetoing
two earlier proposals, Clinton has signed into law a major welfare reform plan that is
designed to end welfare as we know it; however, Clinton did not sit idly by, waiting
for welfare legislation. The welfare reform bill follows three and one-half years
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