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Budget Calls for Cuts in Medicare, Medicaid

TONY COX, host:

From NPR News, this is NEWS & NOTES. I'm Tony Cox in for Farai Chideya, who's on vacation.

Yesterday, President George Bush sent his 2.3 - 2.9-trillion-dollar budget for fiscal year 2008 to the Democratic-controlled Congress. In it, he asked for a significant increase in military spending, almost 25 billion more than last year. He also suggested tightening the belt on some other government-run programs - 141 of them to be exact - in order to balance the budget by 2012 at a savings of $12 billion.

The budget is four volumes long. It will likely take the House and Senate months to debate the proposals. But not all of us have the know-how or the stamina to wade through all that budget language, so we are taking some time today to talk through what these numbers really mean, and there are a lot of numbers.

Joining me now to do this is economist and NEWS & NOTES regular commentator, contributor as well, Julianne Malveaux. She is also president and CEO of Last Word Productions, Inc. She joins us from Washington D.C. How are you doing, Julianne?

Ms. JULIANNE MALVEAUX (CEO, Last Word Productions, Inc.): I'm wonderful, Tony. How about you?

COX: I'm pretty good, I think. I'm glad you're here, because you have your economist hat on and you can help us get through this permanent tax cuts and entitlement cuts, and increases in military spending. Why don't we start with this, Julianne - let's listen to what the President said yesterday about his plan.

President GEORGE W. BUSH: Our priority is to protect the American people. And our priority is to make sure our troops have what it takes to do their jobs. And we've also got priorities in national parks and education and healthcare. But we approve it, and I strongly believe Congress needs to listen to a budget which has no tax increase, and a budget, because of fiscal discipline, that can be balanced in five years.

COX: All right. So Julianne, let's break it down this way. What are the basic things the president is asking for?

Ms. MALVEAUX: Well, the most startling thing is the 11 percent increase in defense spending. It's the largest increase we've seen since the Reagan years. It's a phenomenal increase. And it's as if this man is in a wind tunnel, because you have seen, Tony, we all have seen when you cover the Congress and cover the public the desistance to our increased presence in Iraq.

Yesterday, Senate Republicans closed down discussion about Iraq. But an 11 percent increase is essentially thumbing your nose at the American people at their opinion, and that's what's happening there.

Now, how do we begin to afford that with this notion of a balanced budget in 2012? Well, we cut - you know, No Child Left Behind becomes an unfunded mandate on the states. So while there are wonderful ideas in No Child Left Behind -issues of equity and support for disabled children and other things - those things have actually been cut. Not to mention the higher education and Pell Grants, and all of that.

While the president said in the quote you just ran that he cared about national security, some Homeland Security issues have been cut, especially for this area here - the Washington, Baltimore, Virginia sort of metroplex.

And this is an area that clearly is a great risk. This is where people target. This and New York. And so cutting that makes no sense at all. Cutting low-income housing. So basically, human needs are sacrificed for this war. It makes no sense. It's such a frustrating thing to look at, because it looks like the president simply is ignoring not only the American people, but even people from his own political party who have said, just a minute, let's take a minute here.

COX: Let me ask you how significant this is. For the first time, the president has included what he wants to spend on the Iraq war within the Pentagon budget, which, I'm assuming, offers a little more transparency, or does it not?

Ms. MALVEAUX: Well, offers a little more, but there's also $100 billion request for 2007 for emergency funds. So he has always been able to go back to the Congress and pump up what his request is. So while it's included, it's a minimal inclusion. The other issue in terms of balancing the budget for 2012 is that he assumes that we will be out of Iraq by 2009. But he's done nothing to move us out of Iraq. So whoever is elected in 2008 is going to be the person who has to clean up this mess.

COX: You know…

Ms. MALVEAUX: At cost.

COX: All right, let's go on to another part of this, because it seems that the president is trying to balance a finite pool of money and prioritize what is important at a time of war, which would appear, to me at least, to be a very difficult balancing act to try to maintain. Here's what he says about that.

President BUSH: Congress needs to do something on earmarks in order to make sure that we're fiscally responsible with the people's money. Congress needs to make sure that when they spend the people's money there's transparency and an up or down vote for each item.

COX: So back to the point of trying to balance a finite pool of money to finance the war and yet to push through his proposals with regard to tax reform and other kinds of entitlement tax cuts. How can he do that?

Ms. MALVEAUX: Again, it's on the back of low and moderate-income people. His proposals, Tony, simply increase a level of income inequality that we're experiencing. His point about earmarks, frankly, is well taken. Oftentimes, members of Congress bury specific allocations for things that happened in their districts through earmarks, and there certainly should be some transparency about that.

There also needs to be transparency - this is not a president who's used the word transparency lightly. There should also be transparency around issues of these tax cuts. If the tax cuts are made permanent, it will cost us nearly a trillion dollars. And that means that the wealthy will get over and the poor will not.

There are very few provisions here for poor and moderate-income people, Tony, at a time when what we've seen is not only a stagnant unemployment rate, but very few - very little income growth for people at the bottom. Indeed, the bottom 60 percent. Now that means everybody.

COX: Mm-hmm.

Ms. MALVEAUX: The bottom 60 percent of all Americans have not seen significant wage growth in the past decade.

COX: But, you know, in terms of entitlements, Julianne, there has - almost everyone, even those who are supportive of entitlements, seemed to accept and recognize the fact a change is going to come, or change needs to come, because of the baby boomers getting older and the likelihood that the pool of money available to those folks is going to shrink significantly.

So since we know that entitlement spending is going to have to change, even Ben Bernanke says that how do you determine which entitlements are the ones that you should go after? Is it only politically based, or is it actually politically as well as well as financially based?

Ms. MALVEAUX: At the moment, it seems to be more politically based. Certainly, I think the gorilla in the room that no one wants to talk about is Social Security with the aging of the baby boom, and I do think that that's something that needs to be talked about. Social Security is an entitlement that is not means tested. So everyone gets Social Security, no matter how much money you make. You make, you know, $2 million a year, you make $50,000, you make $10,000 a year, you're going to get some Social Security.

We have to look back at that and look at some social distribution issues around Social Security. And certainly there have been conversations that had been had over the years. But everyone is afraid of the AARP lobby, if you will, because it's a huge lobby. So that becomes one issue. Here it gets to be the question which could cause generational warfare into the future. Do we fund Social Security and starve education? You know, because if you do that, what you're doing is essentially starving the young people who are the bulwark for older people.

I mean if you saw that movie "Children of Men," which is a fascinating movie, it's almost - it raises a whole series of questions about generational interdependence. And this is a conversation that we simply have not had. People over 50 and over 55 believe I've paid into the system all this time. I want my money.

COX: You know that's true.

Ms. MALVEAUX: Hey, hey, you know, over 50, you know, marginally, but still.

COX: I understand.

Ms. MALVEAUX: But in any case, meanwhile, younger people are saying what about us. You know, when folks in my generation graduated from college in the '70s, we had, you know, I had $2,000 worth of student loan debt. Now the average student has $20,000 worth of student loan debt. So it almost seems that we're feeding the elderly and starving the young, and that's a long run bad deal.

But the other parts of this bad deal are things like the CHIP program, the Children's Health Insurance Program. Families with incomes as low as $35,000 would find themselves kicked off this program. So the whole health insurance issue is huge and it's something this president simply has not dealt with.

Head Start, Tony. Head Start. Head Start is one of the few programs in education that we can document the differences from. We can say that if a child is in Head Start, still by third grade we're seeing the significant difference in his or her achievement. And yet this president is cutting Head Start by $100 million.

COX: In case you're just joining us, you're listening to NPR's NEWS & NOTES. I'm Tony Cox and we're talking about the president's budget, and we are talking about it with Dr. Julianne Malveaux, an economist who has joined us from our headquarters in Washington.

Let me ask you about the line item veto because that's one of the issues that the president is also asking Congress for, so that when it comes down to these entitlement programs line by line by line, he can pick and choose those that he would like to support and not support. And yet the line item veto doesn't appear, to me, to be - and I'd like your opinion - something that Congress is likely to give this president.

Ms. MALVEAUX: Nor should he have it. The line item veto does allow the president to go through and pick and choose, and it really rebuts the congressional mandate to also have budgetary authority. The president has proposed the budget, but Congress will respond to that budget with their own set of spending allocations and priorities.

The House and the Senate, who secretly differ, will bat this one out. And the president should not be able to go in and pick out and say, well no, I don't want to give this money to HSBCUs. Well, no, I don't want to do this. It allows him to become a legislator, and that's not his job. His job is to, once he gets a budget, you know, approve it or not approve it. And he's attempting to, as far as I'm concerned, short-circuit the legislative process. It's a power grab and it's an inappropriate power grab.

COX: You know, when the president was reelected, he bragged - and appropriately so I think many people would say - about the political capital that was his to spend. He certainly has had it at times during his presidency. But that political capital seems to have dissipated quite a bit at the moment. What does the president have to do, Julianne Malveaux, to get Congress to buy into his plan? And the second part of that is what does he have to give up?

Ms. MALVEAUX: Well, this president has wasted his political capital on this ill-fated war in Iraq. That's the bottom line. He had…

COX: You know what? I apologize to interrupting you. I've looked at the clock wrong. Our time has run out. I was so deeply engrossed with this…

Ms. MALVEAUX: Our time has run out, Tony? I have something to say.

(Soundbite of laughter)

COX: I appreciate you coming. We will talk again about this tomorrow.

Ms. MALVEAUX: Absolutely.

COX: Thanks very much. Transcript provided by NPR, Copyright NPR.