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Budget agreement is costly and skewed

NCR Staff

Some are celebrating the balanced budget agreement as a welcome sign of the kind of discipline necessary to eliminate governmental red ink.

Advocates for the poor and working class, on the other hand, see in the 1998 budget reconciliation tax package currently making its way through Congress signs of grave danger ahead -- budget deficits as high as $700 billion over the next 15 years.

What is especially worrisome, the critics say, is that some Americans will benefit from about $240 billion in tax cuts over the next 10 years while in the decade after 2007 others are going to have to pay for them as the cuts turn into deficits. That discrepancy, they say, raises serious social issues that should be part of the public debate.

The $600 billion to $700 billion projected deficit outlined in the fiscal year 1998 budget reconciliation tax package is the actual cost of granting tax cuts while keeping to a balanced budget agreement, according to the Center for Budget and Public Policy.

The publicly debated side to the tax package is on precisely how $85 billion in tax cuts will be doled out in child tax credits, capital gains cuts, estate tax exemptions, IRA tax exemptions and education tax credits.

However, as the Center for Budget and Public Policy -- founded in 1981 to examine policy priorities from a low-income family perspective -- states in a June 25 report on the Senate Finance Committee, these tax cuts are "designed in such a fashion that keeps the costs artificially low in the initial years so that the plan fits within cost limits the budget agreement sets."

What Congress and the White House are doing together, regardless of the fine details of the eventual agreement, is what many couples do when purchasing their first house. To keep their household budget in balance, the couple buys the house initially with perhaps a five-year low, fixed-interest mortgage knowing that the full market variable interest rate, plus a balloon payment, then awaits them.

The homeowners are hoping that by the time the balloon comes due, their income will have increased sufficiently to meet their new and more expensive obligations. The White House and Congress are hoping for the same.

But they are not making this "backloading" (the term used to describe costs to the U.S. Treasury increasing over time) a central theme of the public debate.

Rather, the immediate public and political face of the current tax battle is that of the House and the Senate reconciling tax cut minutiae, while Congress and the White House wrestle over details.

The tax cut package will either aid primarily the upper middle class and the wealthy (Congress' version) or aid the middle and upper-middle classes and wealthy with a symbolic nod to the working class (the White House version). "At some point we're going to go into economic recession and we're going to be hurting again for revenues as outlays and revenues become further unbalanced," the center's Wendell Primus told NCR, but "the Republicans will say, 'well, the budget remains balanced.'"

Primus believes the issue of costs in the "out" years is serious, and that the shortfall will have to come out of future entitlements and discretionary spending. And that in turn will hit the middle class rather than those higher up the income ladder.

Network, a Catholic social justice lobby, applauds fiscal discipline but has "grave difficulty" with both the tax cut process and the tax cut packages that "confer two-thirds of the proposed cuts on families with incomes above $93,000, or the highest-earning 20 percent of all taxpayers."

There are other serious issues. In a June 30 statement, for example, Network said Medicare and Medicaid should be restructured within the context of comprehensive health care reform, not as provisions of a budget bill.

Network's Sr. Catherine Pinkerton, a Sister of St. Joseph, sees the budget package, like the earlier welfare reform bill, as "trends in the nation."

People who care about the common good and a social contract, she told NCR, "are fighting on four fronts in this country: on morality, from social values to family values; on the role of government; on the domestic economy itself -- people are still anxious despite the fact the economy is supposed to be booming; and on the fact that people don't know what [the U.S.] role in the world is."

Pinkerton said she "sometimes feels we had to come to this point, of people beginning to look at the entire value system -- at the values that undergird the economy, such as consumerism, consumption, greed," in order "to go into some kind of national reflection on who we are as a people."

National Catholic Reporter, July 18, 1997