`Freeze plus reform equals growth'
IN 1985, the most important responsibility of the Congress is to cut the growth of federal spending, not because this nation needs to adopt a policy of austerity, but rather to ensure growth and prosperity. The more resources are returned to entrepreneurs, the more innovation, modernization, and growth we will have. A call for spending reform is a call for prosperity, not austerity. But what is the proper strategy to get spending under control? What we need is a freeze plus reform. ``Freeze'' -- you hear it said more often in the halls of Congress than at a Maytag repairmen's convention. Never mind that few people can agree on what a freeze really means. Do we mean constant dollars, or do we mean ``real'' spending, which would take into account inflation? Should it apply to outlays or budget authority? How do you freeze entitlement programs like social security, medicare, food stamps, or civilian and military retirement programs, for instance, which pay out benefits when individuals meet whatever statutory requirements, such as age or income, are laid down in the law?Skip to next paragraph
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Despite these difficulties, a freeze is necessary for two reasons. First, it is the best way to reduce the growth of federal spending in the short term. The Senate Budget Committee has estimated that a one-year comprehensive freeze would reduce the projected federal deficit by over $34 billion in fiscal year 1986, and by $168 billion over three years. Congress must do its best to impose an overall freeze in real terms on the entire federal budget this year if we have any hope at all of solving the deficit crisis.
Second, a freeze gives Congress time to consider reforms needed to control cost escalation in programs, and allows time for those reforms to be phased in, so as to lessen the hardship and provide time for current recipients to adjust to changes.
Those who see the freeze as the sole answer to the budget deficit are sadly mistaken. A freeze alone would be little more than a quick fiscal fix to ward off the wolves now. Even though a freeze makes a substantial difference in the deficit, a freeze alone would still leave deficits in the range of $190 billion in 1986 and $160 billion in 1988. If we are to deal with the hard problems of the budget, we need more than a freeze. We need ``freeze and reform.''
A glance at the Congressional Budget Office projections makes the case for real reform in government programs. In 1984, we spent $61 billion on medicare. By 1990, that cost will almost double, to $119 billion. Defense spending will climb from $258 billion in 1984 to $488 billion in 1990. Civilian and military retirement and disability will rise from $38 billion to $56 billion, and medicaid goes from $20 billion to $33 billion over the same time period. Agriculture price-support programs, which cost $7.3 billion in 1984, will average $13.2 billion a year from 1986 to 1990. The list goes on.
In short, we will have failed in the effort to control federal spending if we ignore the critical need to reform spending programs. Further, it is doubtful that Congress or the country will be willing to go through the gut-wrenching agony of fiscal reform year after year. If we don't do it in 1985, we may well lose forever the opportunity to reform programs without creating major hardships for recipients.
Reform will not solve the budget deficit problem overnight, but it will send a message to Wall Street and to Main Street that Congress is serious about reducing the level of government spending. This long-awaited signal will, in my opinion, lead to business decisions that will lower inflation and interest rates, because it will diminish the ``risk premium'' that the private sector has added to the cost of goods, services, and money as a hedge against the profligate spending habits of the federal government.
It will be painful to reduce the growth of government. But this temporary pain is worth it because it will guarantee future prosperity. It is often said that a rising tide lifts all boats. By reducing the percentage of the gross national product that goes to government, we will create a high tide of investment and increased productivity, and avoid the ``crowding out'' by government of private projects that otherwise would have been undertaken.
The United States economy is the envy of the world. Economic recovery not only has created millions of jobs for Americans, but it has been the engine of growth for both the Western industrial and third worlds. The standard of living that my generation has come to take for granted can continue and improve -- but only if we restrain the growth of government.
We have a choice in 1985. We can create a solid foundation for economic growth through freeze and reform of federal spending, or we can continue to enact budgets which require Uncle Sam to pay, as he will in fiscal year 1986, over $142 billion in interest alone, a sum greater than the total of every single federal budget before 1967!
My commitment to reduced federal spending stems from a conviction that a smaller federal government role in the US economy will ensure economic prosperity for my children and my children's children. I want them to have the same opportunity that I had to succeed. By reforming government spending habits -- now -- we'll give them that chance.
Sen. William V. Roth Jr. (R) of Delaware is on the Senate Finance Committee and the Joint Economic Committee.