Taxation & Economics - Page A1
Updated February 7, 1996 - Federal Tinker Toys -
Clinton Cuts Medicare!
by Howard Hobbs PhD, Economics Editor
Tax Increases On The Way!WASHINGTON DESK - President Clinton's 'Five-Year Spending Plan' requires that Americans pay new taxes to pay for his political agenda which he said would lead to a balanced budget by the start of the millennium.
However, president Clinton's numbers don't add up. His economics is still inadequate to the task at hand. Clinton's total spending for the new fiscal year beginning Oct. 1 would reach $1.69 trillion, with a deficit of almost $121 billion. And, under the president's mathematics by the year 2002, even though the president's annual spending would have increased to more than $1.88 trillion, Clinton says that adds up to a surplus of $17 billion.
Admitting the discrepancy, Clinton says he is prepared to close this gap by canceling the tax relief he has promised Americans.
"We're going to spend a lot of time looking at it, analyzing it," said House Budget Committee Chairman John Kasich(R).
Details of the president's 'Five-Year Tax & Spend Budget' was obtained Wednesday night as members of Congress were briefed by the White House on president Clinton's tax and spending ideas.
In summary, Clinton claims he can produce $252 billion in budget savings over five years after adjusting his numbers for the economic 'savings' effects of inflation.
Even after such favorable adjustments, Clinton's yearly domestic spending would still grow faster than his estimates when compared with current levels.
In fiscal 1998, the budget assumes $268 billion in outlays from domestic appropriations - and increase of more than $5.5 billion from this year. Spending for these accounts would continue to grow, reaching $277.1 billion in the year 2000. Settling at $274.3 billion in 2002.
'It is inconceivable to me that discretionary spending can actually be increased,' warned House Appropriations Chairman Bob Livingston(R) Wednesday. The full impact of Clinton's increase in domestic spending is being hidden from the American taxpayer by the White House unreasonably heavy reliance on new taxes and fees to offset costs.
The president also tries to mislead taxpayers on the amount of military spending in his budget. His plan has deep cuts up front. But, by the year 2002, military spending actually grows back to $273.9 billion under the president's plan.
Clinton's 'Five Year Tax & Spend Plan' cancels the new program to help finance construction of public schools that was to be $1.25 billion a year. Now, there will be nothing for schools in the year 2002.
The program to expand health-insurance coverage for workers between jobs would cost $9.8 billion through 2001 has also been dropped by the year 2001.
Clinton's 'Five Year Tax $ Spend Plan' budget assumes new federal taxes of about $350 million in fiscal 1998. That would come on top of the 10% ticket tax, which Congress is expected to renew on a short-term basis soon. All in all, the ticket tax would raise more than $30 billion over five years.
To help pay for Clinton's food-safety initiative, the budget anticipates about $540 million in new taxes & fees next year to be paid by food processors.
Clinton has directed the Labor Department to levy and collect a new payroll tax on employers to help defray the cost of certifying foreign workers.
Veterans hospitals would step up collection efforts from private insurers.
The emphasis on federal taxes & fees is part of a larger strategy by budget director Frank Raines to give agencies a greater stake in the collection of money important to their operations. Many fees now are assigned to the general Treasury, but the new budget calls for changes in law to allow the State Department, for example, to share in money charged Americans for passports and visas.
The Clinton 'Five Year Tax & Spend Plan' calls for cuts of $100.2 billion from Medicare, which provides health insurance to the elderly and the disabled.
Clinton also calls for a net $9.3 billion in cuts from Medicaid, which serves the poor.
The Clinton 'Plan' has total Medicaid cuts of $22.4 billion and redirects the funds to related initiatives. Clinton says that these initiatives are part of a larger package to benefit needy children.
Highlights of president Clinton's 5-year Tax-Spend program:
Tax cuts
- $500 credit for children ($46.7 billion)
- $38.6 billion for $1,500 scholarships for the first two years of college
- $10,000 deductions for college expenses.
- Allows more penalty-free withdrawals from individual retirement accounts for education expenses, first-time home purchases and unemployment expenses ($5.5 billion)
- Reduces capital gains taxes by $1.5 billion by exempting sales of homes with profits less than $500,000
Tax increases
- Raises taxes on businesses and airline travelers by $76 billion by closing various corporate loopholes and reimposing a 10% federal tax on airline tickets.
Education
- Increases spending and tax breaks for education and job training by 20% in 1998 to $51 billion
- Increases the maximum Pell grant to $3,000, up from $2,700 currently
- Adds money for work-study community jobs
- Boosts spending for computers, Internet hookups and reading programs
Medicare
- Culls $100 billion in savings over five years and $38 billion more in the sixth year. Most of it would come from hospitals, doctors and health maintenance organizations.
The poor
- Restores about one-third of welfare cuts, mostly for legal immigrants' lost benefits and food stamps but also for job training.
Defense
- Decreases military budget to $265.0 billion