[Congressional Record Volume 140, Number 110 (Wednesday, August 10, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 10, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                              ENTITLEMENTS

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                       Wednesday, August 10, 1994

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
report for Wednesday, August 10, 1994 into the Congressional Record.

                              Entitlements

       When constituents tell me their concern about our growing 
     national debt, they sometimes ask why, after the recent 
     defense reductions, the elimination of 100,000 federal jobs, 
     and the renewed efforts to trim wasteful projects, is the 
     budget deficit still $200 billion in 1994? Much of the answer 
     lies in the growth of federal entitlement programs, which 
     have increased from $36 billion in 1965 to more than $800 
     billion this year.


                         what are entitlements?

       Entitlements are federal benefits established by law to be 
     provided to any person who meets the eligibility 
     requirements. They include need-based benefits such as food 
     stamps, Aid to Families with Dependent Children (AFDC), and 
     Supplemental Security Income, as well as work-related 
     benefits, such as Social Security, veterans' benefits, 
     unemployment compensation, and farm payments. The 
     Congressional Budget Office estimates that entitlements will 
     cost $803 billion in 1994--over half of all federal 
     spending--and predicts they will grow by another $300 billion 
     by 1999. Among the 400 or so entitlements, the largest are 
     Social Security ($318 billion), and Medicare ($160 billion), 
     and Medicaid ($86 billion). Two striking facts about 
     entitlements are their huge costs and that, while they do 
     prevent poverty, most entitlement spending is not for the 
     poor.


                           growth of spending

       One way of dividing up the federal budget is into 
     discretionary spending and entitlements. Discretionary 
     spending is spending that Congress must specifically vote to 
     approve each year, and it includes defense spending as well 
     as a variety of domestic programs such as the national park 
     system, the FBI, federal highways, and medical research. In 
     recent years Congress and the President have done a fairly 
     good job of reining in discretionary spending. Once growing 
     rapidly, total discretionary spending is now basically flat. 
     Tight caps through 1998 will allow virtually no growth.
       We are not doing nearly so well with entitlements. 
     Basically all of the growth in federal spending in recent 
     years has come from entitlements--and they have grown 
     rapidly. Because entitlements are not directly controlled 
     through the annual appropriations process, they can grow 
     without congressional approval as more individuals become 
     eligible for the programs and as benefit costs rise. Most of 
     the entitlement growth comes from federal health insurance 
     programs--Medicare and Medicaid. They are the two fastest 
     growing federal programs, and will account for more than half 
     of all entitlement growth through 1997.
       Largely because of the expected entitlement growth, the 
     deficit is projected to rise again in 1997 and exceed $300 
     billion six years after that. An example helps show the 
     importance of curbing entitlement growth: If all welfare 
     recipients returned to work now and the AFDC and food tamp 
     programs no longer cost anything, the savings would be lost 
     in a year due to growth in other entitlements.


                          what has been tried?

       Congress has taken some steps to rein in entitlements. Last 
     year it passed a deficit reduction package curtailing 
     entitlement spending by some $80 billion over the next five 
     years. The largest share of savings comes from reduced 
     payments to hospitals and physicians, as well as trimming 
     federal employees' retirement costs. Similar cutbacks were 
     made in the 1990 deficit reduction act. After-tax benefits 
     for relatively better-off Social Security beneficiaries were 
     also trimmed. Congress has also enacted pay-as-you-go 
     requirements for all new entitlement programs: Any new 
     entitlement program must be paid for by cutting some other 
     spending or finding revenues to pay for it. But since this 
     only applies to new programs and not to increases in existing 
     entitlements, it has had limited impact on entitlement 
     growth.


                            additional steps

       Various approaches have been proposed for better 
     restraining entitlement spending. One approach would be to 
     place spending caps on entitlements. Because the caps 
     Congress placed on discretionary spending in 1990 have worked 
     reasonably well, some have suggested also placing caps on 
     entitlements--which would mean putting an overall ceiling on 
     the amount that could be spent each year on entitlements. But 
     recent attempts to cap entitlements have failed to pass 
     Congress because of concerns about how caps would be 
     implemented. For example, once the cap is reached, would 
     benefits be reduced or would new applicants be denied access 
     to the programs? Would exceeded caps in one program require 
     across-the-board cuts in all programs? Caps can help put a 
     brake on spending, but they do not solve the real problem of 
     making specific policy changes in specific entitlements to 
     reduce future costs.
       A second approach would be to apply need-based criteria to 
     more entitlement programs. Although some entitlements such as 
     welfare (AFDC) are means tested--which means that only those 
     below a certain income receive benefits--most entitlements 
     are not. In 1991 nearly one quarter of all federal 
     entitlements dollar went to households with incomes over 
     $50,000.
       A third way to trim entitlements is to look program by 
     program for ways to trim costs. This is what is happening to 
     some extent with the current debate over health care reform, 
     as ways are sought to curb future Medicare and Medicaid 
     increases. Evaluating each program according to its own 
     merits and cost makes good sense but is difficult to do 
     because of the popularity of some of the programs. In July I 
     supported a bill that will help Congress monitor the total 
     costs of entitlement spending and that requires the President 
     and Congress to address spending that exceeds budget targets. 
     This will formalize and strengthen steps that now exist in a 
     presidential Executive Order. In addition, later this year 
     the President's Bipartisan Commission on entitlements will 
     report their findings and make recommendations for reform. 
     This report should open up discussion about individual 
     programs and present realistic options for curbing 
     entitlements.


                               conclusion

       One of our top priorities as a nation should be getting the 
     federal budget deficit under control, and to a large extent 
     that means getting entitlements--particularly federal health 
     insurance costs--under control. The projections of 
     entitlement growth and the resulting burden placed on our 
     economy are indisputable. Making the difficult choices will 
     not be easy, but they are essential for the long-term 
     economic strength of our country. An entitlement system that 
     provides affordable benefits when we need them is important, 
     but we must also save and invest more for the future of 
     ourselves and our children.

                          ____________________