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Panetta's Revenge
In his confirmation hearings one year ago this month, Budget Director Leon Panetta said the new administration's first budget would include "two dollars of spending cuts for each dollar in new taxes."
Mr. Panetta is a good guy, a White Hat. He was a moderate Democrat in the House, and understands key financial concepts. Ones like; if you spend more than you earn, borrowing the difference for long enough can get you in trouble.
A month after his hearings, Mr. Panetta was given the job of selling the real budget. He was forced to describe that budget as "one dollar in spending cuts for each dollar in tax increases," knowing full well that there were no current year spending cuts at all, and that after five years Federal spending would increase by $400 billion per year.
Mr. Panetta looked more transparently unhappy while saying something he knew not to be true than any public official I can remember.
However, that first Clinton budget did contain an odd sort of spending cut: about $250 billion in future spending was removed from out-year budgets, and a spending "cap" installed. (That's how out of control Federal spending was and is: you cut $250 billion in future spending, and the total still rises by $400 billion.)
Mr. Panetta is not a mean-spirited man, and not prone to revenge. But he is the man charged with enforcing the "reduction in the rate of future increase." He was made to sell this deal, and he is going to make sure that it sticks.
How time flies. Only one year into the Clinton Presidency, and his team has to pass another budget.
The enforcer has work to do already.
It seems that Defense Secretary Les Aspin and Senator Sam Nunn believe that the military budget got short-changed $50 billion last year, and they want the money back. They may want even more money if a little contretemps develops with North Korea, or in Bosnia. (Do you remember the "Peace Dividend? The money was switched entirely to social programs, and spent.)
Mr. Clinton's left of center advisors, led by Mr. Stephanopoulos, want more money for domestic spending. Under the caps in last year's budget, there isn't any more money. As it turns out, there were future spending cuts that were not quite nailed down, and the caps are already in trouble.
One of those cuts was the $60 billion or so to come out of Medicare and Medicaid, but nobody knows how, yet.
Which leads to the president.
In two speeches last week, the president said he has discovered that entitlement spending is growing too fast. This is the same fellow who would not lay a glove on any entitlement in last year's budget.
He proposes a national debate about slowing Social Security spending. In the same breath he says that the only way to control Medicare and Medicaid spending is to pass his health care proposal, which would be an enormous new entitlement.
Universal medical coverage has been needed for a long time, and should be passed in some form, but it's going to be expensive. Mr. Clinton's claim that it will save money net of new expenses is just another of his unresolved contradictions between good ideas. (By the way, I'm a certified health care expert because my wife is a nurse, we have an uninsurable child, and I went to college with Ira Magaziner. Take that, Hillary.)
Another contradiction: Mr. Clinton last month shot down a $90 billion cut in current spending proposed by moderate Democrats because th3e new cuts would inhibit his plans for new "investments," which are not spending, of course.
The Congressional vote on the 1995 budget won't be held until springtime, but Mr. Panetta will start knocking heads in earnest right after the New Year. The new budget won't draw many more Republican votes than the last (none), and conservative Democrats didn't like the old one, either. The Democratic left, which did support Mr. Clinton last time, is annoyed over Nafta, prefers a single payer health care package (as opposed to 1,342 pages of gobbledygook), and wants to raise taxes (again) for more social spending.
Mr. Clinton's natural base of Congressional support is measured in the dozens.
Complicating life for Mr. Clinton is the need for the Democratic majority to get re-elected next November. A whiff of budget business as usual, and incumbent bums are going to be thrown out is droves. Another phony go ‘round on the budget would also ensure passage of the dangerous and silly balanced budget amendment to the constitution. If the budget battle gets bad enough, health care reform will be held hostage until after the election, or longer.
There is another interested party in the budget negotiations: the arch-capitalist mercenaries of lower Manhattan. These worthies will see to it that interest rates rise and choke off incipient recovery in the economy at the slightest sign that spending caps are off.
Go get ‘em Leon! Pull those caps down around their ears! You earned your shot with those gut-wrenching fibs on Meet The Press and McNeil-Lehrer last year.
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