What the Balanced-Budget Deal Means for Americans' Pocketbooks

The balanced-budget deal finalized by President Clinton and congressional leaders Friday faces more hurdles before it is implemented. But while Congress now thrashes out the particulars of the agreement - a potentially rough-and-tumble process during which some elements could change - the deal's effects on average Americans' pocketbooks are becoming clearer.

"We've produced the first balanced budget in 32 years, tax relief for America's families, a Medicare program that will remain solvent for the next decade while providing more health care for senior citizens, big entitlement reforms, and real restraint in Washington spending," says Rep. John Kasich (R) of Ohio, House Budget Committee chairman and an architect of the deal.

The resolution sailed through the House Budget Committee 31 to 7. The Senate Budget Committee takes it up today and leaders hope to pass it through both Houses by the end of the week.

"What is important about the agreement is not what it will do on a spreadsheet, it's what it will do for our families and our future," President Clinton says.

Tax credits and cuts

Take, for example, a traditional family of four. The family will probably get a $1,000 tax credit: $500 per declared child. If one or more of the children is in college, the family will get some combination of tax credits and deductions to help pay for tuition. More of those students will be able to get student loans.

Families and individuals who sell investments for a profit will pay Uncle Sam less. The deal calls for a capital-gains tax cut, although the exact amount remains to be determined. Families inheriting small businesses, family farms, or estates valued at more than $600,000 will pay fewer estate taxes. While many in Congress advocate doubling the amount exempt from taxes to $1.2 million, the size of the cut and who will be eligible will be fought out in committees and on the House and Senate floors.

Democrats want to ensure that at least half of the tax cuts go to "working families" - by one definition, those making less than $70,000 a year. Republicans reply that the top 10 percent of wage-earners already pay almost 50 percent of federal taxes. The net tax cuts total $85 billion over the next five years and $250 billion over the next decade.

Health-care spending

Medicare recipients will see several changes over the next five years. While the growth of Medicare spending will be slowed by $115 billion, the amount per beneficiary will rise 6 percent a year, from $5,480 per recipient today to $6,911 in 2002. That's down from a projected 8.6 percent. Congress will change the program to include more choice for beneficiaries among competing plans. Home health-care services will be paid out of the general fund, rather than the Medicare Trust Fund, thus helping keep the fund solvent until 2007 instead of going bankrupt in 2001. The "Part B" premium recipients pay will rise modestly, but low-income beneficiaries will be protected against the increase.

The budget plan creates new Medicare benefits, including coverage for annual mammograms, diabetes, immunizations, and screening for colon cancer.

Medicaid spending on poor families and individuals will rise from $2,261 per recipient this year to $2,946 in 2002, a 6.9 percent yearly increase that saves the government $13.6 billion over current projections of 7.8 percent growth. But the government will spend an additional $16 billion over five years to provide health-care coverage or services to 5 million currently uninsured children. This may come through Medicaid or through block grants to states to craft their own programs.

Legal immigrants who are disabled will see their Supplemental Security Income and Medicaid benefits restored in October if they entered the country before Aug. 23, 1996. The welfare-reform bill passed last year had eliminated those benefits, leaving disabled immigrants with no safety net.

Air travelers won't get a break, though. The plan calls for extending airline ticket taxes, which currently add 10 percent to the cost of each trip.