The Economic Policy Institute has a new Web Page feature
entitled
"READING BETWEEN THE LINES:
Selected corrections, clarifications, and amplifications to economics
coverage in the New York Times and Washington Post."
To find it, go to www.epn.org, and choose the EPI section.
It's fun reading, even if you don't read the Times or Post
every day. The analyses are short and to the point, and don't bother
with any name-calling or sniping. I'll post a couple of
selections here for a sample (feel free to forward this notice
to other lists):
Line-Item Veto Power: Less Than Meets the Eye, by David E. Rosenbaum, New
York Times, March 29, 1996, page B11.
This analysis of the impact of the line-item veto asserts that controlling
entitlements is essential to balancing the budget. (It actually states that
"everyone who has studied the budget" agrees with this point.) In fact, most
categories of entitlement spending are not out of control: only the health
care component of entitlement spending is projected to grow more rapidly
than government revenue. Even before the latest proposed cuts in spending,
entitlement spending, excluding health care, was projected to rise 33.5% in
the years from 1996 to 2002. This is only 0.9% more than the 32.6% projected
growth in revenue over this period (Congressional Budget Office, The
Economic and Budget Outlook: Fiscal Years 1996- 2000, January 1995.) This
means that entitlements as a whole are not a threat to a balanced budget;
the problems are posed by Medicare and Medicaid spending.
Furthermore, the projected growth of spending in these areas is derived from
projections of explosive growth in private-sector health care spending. The
Health Care Financing Administration (the source of the Office of Management
and Budget's Medicare and Medicaid projections) makes its projections for
government health care spending by first projecting total national health
care spending. It then calculates the percentage of this spending that will
be borne by the public sector.[2] The growth rate of private-sector health
care spending in HCFA's projections is so high as to lead to rapidly
declining living standards and eventual economic collapse. By 2030, average
health care spending for a family of four will be more than 90% of the
median family's pre-tax income. The real source of long-range budget
problems, then, is the national health care system. Focusing on entitlements
as a whole or just the public provision of health care conceals the real
problem.
2. See, for example, Waldo, D.R., S.T. Sonnefeld, J.A. Lemieux, and D.R.
McKusick, "Health Spending Through 2030: Three Scenarios." Health Affairs,
Vol. 10, No. 4, Winter 1991, pp 231- 242.)
_____________________
Senate Passes Line-Item Veto Bill, by Helen Dewar, Washington Post, March
28, 1996, page A1.
This article asserts that the Senate's passage of a line-item veto bill was
"prompted by a collective failure at fiscal self-discipline." This assertion
is unwarranted for two reasons. First, the Congress has demonstrated
tremendous fiscal discipline over the last decade. In 1986, the deficit was
over $220 billion. GDP was $4,220 billion in that year, making the deficit
over 5% of GDP. Furthermore, since the economy was fairly healthy in 1986,
this was a "structural" deficit, not a cyclical deficit driven by high
unemployment. Current projections place the 1996 deficit at approximately
$160 billion, approximately 1.9% of current GDP. This reduction was
accomplished in spite of considerable growth in interest payments (from $136
billion to $260 billion) and health care costs over this period. At present,
the U.S. government deficit is lower as a share of GDP than the deficit of
any other major industrial country. The debt-to-GDP ratio has actually been
falling the last three years, meaning that the debt is becoming smaller
compared to the nation's ability to service it. These figures suggest a
considerable amount of "fiscal self- discipline" on the part of Congress.
The second reason the article's assertion is unwarranted is that there is no
reason to believe that a line-item veto will contain spending. A line-item
veto simply transfers power from the Congress to the president. Will
presidents be any less eager to endorse "pork barrel" projects in exchange
for votes than are members of Congress? (Recall the pork-barrel promises
made by the administration to secure a NAFTA victory.) In a recent study,
Douglas Holtz-Eakin of the University of Maryland compared the fiscal status
of states where governors had line-item vetoes with ones where the governors
lacked this power. He found no difference in spending patterns.
Mark Weisbrot
2501 Q Street NW, #111
Washington DC 20007
(202) 333-6141
(202) 965-0830 (day)
fax: (202) 965-0831
e-mail: [EMAIL PROTECTED]
