WASHINGTON –With the
House and Senate headed toward passage of a $792 billion, 10-year tax cut, The Concord
Coalition today challenged Congress and the President to make the hard choices on
discretionary and entitlement spending before enacting a major tax cut.
WASHINGTON –With the
House and Senate headed toward passage of a $792 billion, 10-year tax cut, The Concord
Coalition today challenged Congress and the President to make the hard choices on
discretionary and entitlement spending before enacting a major tax cut.
“Cutting taxes in
anticipation of spending cuts that have not been made, and may never be made, is a recipe
for the return of chronic annual budget deficits,” said Policy Director Robert Bixby. The Concord Coalition pointed out that Congress
and the President have yet to agree on several key spending issues, including:
Discretionary caps The Congressional
Budget Office (CBO) baseline assumes that the discretionary spending caps will be complied
with through 2002. It is increasingly clear, however, that this goal will not be met. Spending will exceed the caps either explicitly or
by stealth through the emergency loophole. The projected baseline surplus varies by
hundreds of billions of dollars depending upon the path of discretionary spending. Tax
cuts should therefore await a more realistic assessment of the non-Social Security
surplus, which will be available only after the dust settles on the appropriations bills.
Medicare prescription drug benefit Congressional leaders and the President seem to
agree that a prescription drug benefit should be added to Medicare. According to CBO, the
President’s plan would cost $111 billion over ten years. Republican leaders have suggested
a less expensive approach, but the question remains C how much will the new
benefit cost?
Social Security reform The CBO
baseline assumes that the entire surplus will be used for debt reduction. But what about
Social Security reform? Many responsible
reform plans would use at least the Social Security portion of the surplus as the down
payment on a funded system of individually owned Social Security accounts. If combined
with appropriate long-term cost savings in the rest of the program, such a reform plan
would do more to improve the outlook for future generations than a strategy of debt
reduction alone. Enacting a major tax cut now, however, could drain away resources that
may well be needed for the costs of transitioning to a more sustainable, generationally
equitable Social Security system.
"The bottom line is
that, at the moment, political leaders have no idea how to meet the long-term spending
promises that have been made for Social Security and Medicare, and no idea how to meet the
tough discretionary spending caps on which the baseline surplus is premised. Major tax
cuts should await the resolution of these issues. If the politically hard choices are not
made before the easy ones, there is a very real danger that we’ll end up spending a
surplus we don’t really have," Bixby said.
