Congress OKs Tax Cut Plan Amid Medicare Concerns
The House and Senate on Saturday approved an 11-year, $1.35 trillion tax cut package despite concerns from Democrats that the bill could send the nation "back in a fiscal hole just as it confronted the costs of paying retirement and health benefits of an aging population," the New York Times reports (Stevenson, New York Times, 5/27). Meeting in a "rare" Saturday morning session, "bleary-eyed" House members passed the legislation 240-154, with 28 Democrats and one independent joining 211 Republicans to back the measure. The Senate approved the bill two hours later 58-33. While 12 Democrats voted in favor of the legislation, two GOP senators -- Sens. John McCain (R-Ariz.) and Lincoln Chafee (R-R.I.) -- opposed the bill (Kessler/Eilperin, Washington Post, 5/27). Republicans hailed the tax cut package as a "model" plan. "The party is over. The addicts are going to have to take the cure. We are no longer going to get stoned on the people's money," House Majority Leader Dick Armey (R-Texas) said (Godfrey, Washington Times, 5/27).
Democrats, however, "attacked" the bill as "recklessly large," maintaining that the legislation would "drain resources from other government priorities," such as Medicare. "They call it a tax cut bill, but it is really a formula for depriving Social Security and Medicare of needed resources," Rep. Charles Rangel (D-N.Y.) said (Hook, Los Angeles Times, 5/26). Sen. Robert Byrd (D-W.Va.) added that the tax cut has "soaked up scarce dollars that are needed for education, Social Security, Medicare, a prescription drug benefit and the many other important priorities of the American people" (Stevenson, New York Times, 5/27). In addition, Democrats warned that the tax cut plan "relies too heavily" on projected budget surpluses that "may not materialize" (Hosler, Baltimore Sun, 5/27).
According to the Wall Street Journal, the tax cut package "all but eliminates the cushion" of the projected $5.6 trillion budget surplus over the next few years, "running federal spending close to Medicare and Social Security reserves within a couple of years." Critics warn that the government, in the wake of the tax cut, "soon will be dipping into" Medicare "unless the economy produces bigger surplus estimates." Robert Greenstein, executive director of the Center on Budget and Policy Priorities, said, "There's now a near certainty that policy makers will have to go into the Medicare hospital insurance surplus," adding that federal budgets will tap the $400 billion Medicare surplus "to the tune of at least $150 billion" over 10 years -- "enough to speed up the technical insolvency date" of the Medicare Part A trust fund by several years. However, Bush administration officials said that the government could finance the tax cut by holding down discretionary spending. "Both (houses) of Congress were comfortable this agreement would not dip into the Medicare surplus," an administration official said (McKinnon, Wall Street Journal, 5/29).
Still, the New York Times reports that "price tags of all the additional programs planned" by Republicans and Democrats have already "largely parceled out" the projected budget surplus, and "doubt remains about whether the windfall will appear as forecast." Lawmakers will now begin to debate spending for a "multitude of priorities," including health care, medical research and Medicare reform. "Starting from the premise that it's all going to be there, it does seem to me that the surplus is overcommitted, at least rhetorically," Robert Bixby of the Concord Coalition said, adding, "The tax cut is going to constrain the other choices." After funding the tax cut and setting aside money for debt reduction, lawmakers have reduced the $5.6 trillion surplus to $1 trillion, and several "major campaign promises and policy initiatives," including a prescription drug benefit and Medicare reform, "would bump right up against" that figure. In addition, the cost of many of planned programs "could be considerably higher" than expected, the New York Times reports. For example, a prescription drug benefit under Medicare may cost hundreds of billions of dollars more than the $300 billion earmarked by Congress, according to health care analysts (Stevenson, New York Times, 5/27).