Redirection is a favorite device for magicians. Your eye is drawn to the magician’s left hand that is waving a colorful scarf or a magic wand, while the right hand is sneaking into a hidden pocket to snatch the pigeon that will later appear as if from nowhere.
If you want to figure out what’s really going on, you need to look at the hand that is not frantically waving in the air.
The same has become true with our nation’s economic policy. While everyone is paying attention to proposals to change Social Security, other issues are either being ignored or are being hijacked by moneyed special interests. Some of the most egregious examples of bad policy choices are embodied in the recently passed 2006 federal budget.
Here’s some of what you might have missed in the budget and elsewhere:
Health care for low-income families: The budget passed by Congress contained $10 billion in health care cuts. This comes despite the fact that a majority in both chambers voted to remove all Medicaid cuts. The House voted overwhelmingly (348-72) to instruct the conference to remove Medicaid cuts; and before passage, the Senate passed 52-48 an amendment to remove Medicaid cuts. Yet the final approved agreement reinstated $10 billion in cuts.
Cuts, cuts, cuts. Spending on programs that provide automatic benefits for those who qualify (so-called entitlement programs) are set to be cut by $25 billion over the next five years, over and above the Medicaid cuts. These cuts could come from agriculture programs, student loans, food stamps and/or a range of other federal investments. The coming months will tell us exactly where these cuts will happen, but under the current budget they will have to come from someplace.
And more cuts. Spending on programs that are funded through the annual appropriations process is set to be cut in real terms by $212 billion. This money is used to fund education, scientific research, veterans’ health care, environmental protection and other services and investments.
More revenue reductions: The budget that Congress set for itself includes over $100 billion in lost revenue over the next five years-$70 billion of which will be fast-tracked through the reconciliation process. If the tax changes look anything like the past four years, we can expect additional windfalls for the wealthy. Republican leaders have already expressed the desire to extend rate reductions for capital gains and dividends. Over half of capital gains taxed at preferred rates are realized by people making more than $1 million per year.
: The budget passed by the Congress will dig the hole deeper by an estimated $168 billion over the next five years
. When combined with a modest fix for the alternative minimum tax, deficits are expected to remain in the $300 billion range for the next decade.
Drilling in ANWR: The budget contained a provision that would virtually ensure that drilling in the Arctic National Wildlife Refuge (ANWR) would be allowed. Over the past few years, this was a major issue, and it seems to have slipped under the radar this time around.
Estate tax: The House of Representatives voted to repeal the estate tax-a tax that impacts the heirs of multi-millionaires. Currently, $3 million can be passed from a married couple to their heirs tax-free. And only about 1 percent of decedents pay any tax at all. It only seems fair that the very wealthiest among us should pay their fair share, especially at a time when we are asking for sacrifices from those fighting abroad and when the middle class is struggling to get by. The Senate may take up the measure soon, and while most Americans would support reform, there will still be a big push for full repeal. The total cost over the first decade of repeal would total nearly $1 trillion.
Bankruptcy: The president recently signed into law a bankruptcy bill that wipes away people’s ability to start fresh when faced with personal financial difficulty. Not surprisingly, the credit card industry strongly supported the bill. Since half of all bankruptcies are a result of medical costs, this means that people will be faced with a double whammy if they fall ill-especially if they are one of the 45 million without health coverage-by having to deal with both an illness and the financial fallout.
Unmet needs: Where is the additional funding for basic science and education? How should we meet the needs of the 45 million uninsured? Why can’t we allow the Medicare drug program to negotiate prices? Will we adequately support our veterans’ health care needs? What about a real energy policy? Of course, these are not the only pressing issues that need solutions and that are currently outside the political and media spotlight.
Why should Social Security get all the attention? Even if nothing is done to improve the system over the next 40 years, the program would still be able to pay about 80 percent of promised benefits. The proposals coming from the administration-privatization accounts, which don’t impact solvency and weaken the system; or sliding-scale benefit cuts, which simply accelerate benefit cuts for those with moderate incomes-have become a grand distraction. While the Social Security fight is indeed important and potentially represents a defining political moment for both political parties, we cannot forget other pressing issues.
The waving scarf might be colorful, but sometimes the real action is going on behind the magician’s back.
John S. Irons, Ph.D., is the director of tax and budget policy at the Center for American Progress.
For more on the Budget visit The 2006 Budget: Making the Wrong Choices