Warning Signals Are Raised Higher Over Obligatory Federal Spending

EYE ON ENTITLEMENTS

AMERICA'S ``safety net'' programs, including such popular, middle-class entitlements as Social Security and Medicare, confront a deepening financial crisis - unless Congress acts.

The Bipartisan Commission on Entitlement and Tax Reform, which has spent months probing the nation's 400 social-benefit programs, has heard warning after warning about the need to take strong measures. Among the commission's tentative findings:

* Despite its current surplus, the Social Security Trust Fund will begin paying out benefits faster than it takes in revenues by 2013 as the huge baby-boom generation retires. The trust fund could be flat broke by 2029, or even sooner.

* Medicare hospital insurance is expected to run out of money by 2001 under current policies. To pay for rapidly rising costs, Medicare payroll tax rates would need to rise from 2.9 percent today to 8 percent by 2030.

* Outlays for entitlements are rising so fast that by 2030 Social Security, Medicare, Medicaid, and federal employee retirement would gobble up every dollar of federal taxes - with nothing left for anything else, unless action is taken.

The `biggest issue'

Sen. John Danforth (R) of Missouri, vice-chairman of the 32-member presidential commission, calls the looming crisis over entitlements the ``biggest issue'' facing the country.

Sen. Robert Kerrey (D) of Nebraska, the commission chairman, says that the coming crisis in entitlement funding ``grows in size the longer you wait.'' What might be easy to fix now could be very difficult to repair by 2005.

One of the most important elements of entitlement reform is improving the efficiency of the health-care system.

Costs for both Medicare and Medicaid are escalating far faster than any other major program in the federal budget.

However, Senator Kerrey warns that his initial reading of the newest health care proposal, put forward by Senate Democratic leader George Mitchell of Maine, indicates that if adopted, the plan may make matters only worse.

The commission is scheduled to make recommendations to Congress and President Clinton on Dec. 15. Meanwhile, members aren't pulling their punches.

Kerrey warns that without changes in current policies, Washington will eventually be unable to fund many important non-entitlement programs. Even today the government is so strapped for cash that ``such celebrated acts as the Interstate Highway System and the GI Bill would not be possible,'' he says.

At an early-morning meeting yesterday with several reporters in the Capitol, Kerrey characterized the entitlements crisis as ``unique.'' Ordinarily, serious problems like crime and joblessness are brought to the attention of Washington lawmakers by the voters. But this time it is Washington insiders, studying long-range spending projections, who are sounding the alarm, while the voters seem apathetic.

Kerrey and Danforth called on the media to alert the public to a problem many politicians consider too sensitive to discuss with voters because it touches the pocketbooks of millions of Americans. As Danforth noted, ``It's been called the `third rail' of American politics.''

Karen Horn, chief executive officer of Bank One Cleveland and a member of the commission, says that reforming entitlement programs will mean ``difficult choices.'' But she adds: ``The longer we wait, the fewer choices we will have and the more difficult they will become. Some, perhaps all, of us may need to share in the burden'' of reform.

Our children's future

At a series of commission meetings (the next will be on Monday, Aug. 8), members have heard over and over about the need for action to protect the financial future of the nation's children. As the national debt escalates, private savings slow, entitlement programs swell, and funds for other programs such as education dry up, witnesses warned, the heaviest burden will eventually fall on today's youngsters.

Kerrey says he is hopeful that the generous benefits being paid to today's elderly and poor, much of it paid for by today's workers, will not spark an ``intergenerational war.'' But he says the nation confronts a moral question: ``Are we being fair to the children and young workers in America today?''

The senator says that his discussions with people back home in Nebraska indicate to him that they are ready to take reasonable steps to correct the problem.

``Americans, when they are challenged, ... have always been able to surprise the prognosticators,'' Kerrey says. ``The question is, are we going to challenge them?''

That question will become even more pressing in the next century. Unless health-care costs are restrained and retirement benefits are controlled, taxes will have to rise sharply, or federal borrowing will have to increase.

The commission's draft report notes: ``To put the long-term fiscal imbalance in perspective - in 2030, if no action is taken in the interim, [holding down the deficit] will require a choice between increasing every federal tax by 85 percent and cutting every federal program and entitlement by more than half.''

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