Uploaded by Ben Morehead, Associate Publisher of Policy Review magazine and authorized agent for the copyright owner(s). ON THE CUTTING EDGE The House GOP Alternative to Clinton's Budget by John R. Kasich From the Summer 1993 issue of Policy Review To subscribe to Policy Review, call (800) 544-4843 On March 18, 1993, 132 Republicans and three Democrats did something unusual for members of Congress: they voted to shrink the size of the government. The vote was for a budget resolution, offered on the floor of the House of Representatives by Republicans on the House Budget Committee, to reduce federal spending by $430 billion over five years. This GOP budget achieved the same amount of deficit reduction promised by President Clinton's budget. But unlike the president's plan, the Republican budget achieved all of its savings through spending restraint. It did not raise any taxes and did not disturb the government's Social Security contract with the American people. Many Republicans initially believed it was a mistake to put forth such a budget of their own. However, as the new ranking Republican on the House Budget Committee, I believed it was absolutely necessary for the GOP to develop a bold, serious budget alternative to the president's economic plan. My GOP Budget Committee colleagues and I convinced most members of our party in the House that a detailed budget was essential in distinguishing the Republicans' intent to control the growth of the federal government from the Democrats' desire to expand it. "No Hot Air, Show Me Where" When President Clinton presented his budget strategy on February 17, in what he called his "Vision of Change for America," he asked critics of his plan to be as specific and thorough as he was in developing their alternatives, and precisely identify where they would allocate resources differently. His demand: "No hot air, show me where." Leon Panetta, the new director of the Office of Management and Budget (OMB), repeated the challenge in testimony to the House Budget Committee. Committee Republicans already had decided that any alternative they produced would be substantive and specific -- it was not enough to call for a spending freeze or spending "caps." Such mechanisms only determine limits on aggregate spending amounts; they do not face up to the kinds of program changes needed to achieve the savings. They also ignore the different impact that the same level of spending cuts will have on individual programs and departments. Control of federal dollars can only come by confronting particular programs line by line. Republicans needed to show precisely how and where they would achieve the savings they claimed. A Clinton Trap? Republicans who were reluctant to go forward with an alternative had understandable concerns. They saw the Clinton challenge as a trap. A GOP budget alternative would draw attention away from the Clinton budget and its numerous flaws, while asking Republican members to support spending cuts that could be unpopular with many constituents. It could draw the opposition of various interest groups, focusing attention on what they disliked in the Republican plan and away from everything that was wrong with the Clinton plan. Despite these hazards, Budget Committee Republicans were convinced that, without a credible alternative to the president's budget, Republicans would come off as petty naysayers whose criticisms would not be taken seriously. Even more important was the future impact of such an approach. If Republican policies were to succeed in the long run, they would have to be formulated, explained, and advanced at every opportunity. If Republicans wanted to govern again, they had to show they knew what role the federal government should play in the life of the nation and that process had to start now, with the budget resolution. The zeal and commitment of the committee's Republicans became apparent early. They quickly agreed on certain demanding criteria for their budget: Credibility. Every spending reduction, every program termination, every government reform had to be based on sound and defensible analysis. There could be no gimmicks. Specifics. The Republican budget would need to be thorough and specific -- as much as the president's plan. Political viability. The budget had to be one that a large majority of Republicans could support. A program that received no more than, say, two dozen votes would not represent a realistic blueprint for governing behind which Americans could rally. Social Security Off Limits Several other substantive criteria were established. First, and most important, the Republican plan would contain no tax increases. One of the most fundamental convictions of Budget Committee Republicans is that chronic budget deficits are the result of excessive government spending, not inadequate tax revenues. The Republican budget resolution needed to reassert this point. The president already had reversed his campaign promise to cut middle-class taxes. The budget plan he unveiled in February contained more than $350 billion in tax increases, many of them imposed on middle-income earners. These included taxes on energy, gasoline, and on the Social Security benefits of middle-income senior citizens. These taxes, along with the many others the president proposed, offered Republicans a clear opportunity to demonstrate the differences between the two political parties: We would reduce the budget deficit without raising any taxes. Second, Social Security was off limits. Republicans believe that Social Security represents a fundamental agreement between the Federal Government and the American people -- an agreement that must be preserved. Once Mr. Clinton raided Social Security benefits by expanding the taxable portion of these benefits and calling the added taxes a spending cut, he presented a clear opportunity for a distinction between Democratic and Republican strategies: Republicans would achieve their deficit reduction without cutting benefits that American senior citizens have come to consider a sacred trust. Third, prudence was essential in the defense arena. The president, in his budget, proposed roughly $112 billion in defense spending cuts over five years. This was double the amount of defense cuts he had proposed during his campaign. Republicans acknowledged that the world had changed with the end of the Cold War. This did not mean, however, that the United States and its allies were now free of security threats. Therefore, the Republican budget would adhere to the figure on which Mr. Clinton had campaigned -- cutting no more than $60 billion from defense over five years. We didn't outline in detail where our $60 billion in defense cuts would come from. Indeed, we might have lost some coalition members if we had to identify specific weapons systems to be eliminated or specific bases to be closed. We were as specific here as the president was. Wide Latitude for Working Groups To develop a comprehensive plan, Republican committee members were divided into several working groups: national security, economic growth/budget process, health care reform, human empowerment, physical capital, natural resources and science, and government management. This approach allowed us to distribute the work load and capitalize on the interests and leadership talents of individual committee members. For example, Alex McMillan of North Carolina has spent years examining the alarming growth of spending in Medicare and Medicaid, the government's two major health programs, and is the third-ranking Republican on the Energy and Commerce Subcommittee on Health and the Environment, which handles both programs. He handled our working group on health care. Another example was Lamar Smith of Texas, who for several years has been pushing legislation to cut government "overhead" spending on items such as travel, printing, and supplies. He led the working group on government management. Jim Kolbe of Arizona has long been a strong voice on the importance of restraining federal entitlement programs, which are driving spending and the deficit. He was put in charge of the working group on what we called human empowerment. Olympia Snowe of Maine brought expertise on foreign aid programs from her post on the Foreign Affairs Committee. She joined with Christopher Shays of Connecticut, who has a deep personal interest in defense issues through his work on the Government Operations Subcommittee on Legislation and National Security, in fashioning our national security proposals. Committee members had only two-and-a-half months to develop a complete budget. Working group sessions were frequent, intense, and productive. Members vigorously debated each one of dozens of proposals for reforming the government and controlling its costs. Staff members often worked into the night and through the weekends compiling the working groups' decisions. Members also consulted at length with colleagues on other committees whose support would be needed later. For instance, Bob Walker of Pennsylvania, the Ranking Republican on the Science, Space, and Technology Committee, worked closely with our committee members to shape a series of spending reductions that could win the support of Republicans on his committee. Among these was a recommendation to cancel the NASA program for developing an advanced solid rocket motor. Consultations between Budget Committee Republicans and their fellow GOP members in the House contributed to building a coalition for our budget in two basic ways. First, each of the 17 committee members was reaching out to other colleagues with whom he or she had contact. Second, if non-committee members made recommendations that we followed, they then would have a stake in the product that emerged because they had contributed to it. The working groups were given considerable latitude in developing criteria and spending goals tailored to their programs. Working groups were not given specific spending reduction targets they had to meet; they were encouraged simply to seek out reasonable and significant savings that could win broad public support. Furthermore, we were not just concerned with numbers. We wanted to develop government reforms that actually enhanced the effectiveness and efficiency of government, while at the same time saving money. Facing Political Realities Our efforts culminated in a five-and-a-half hour meeting of all the committee's Republicans on the evening of March 2. Every proposal developed by the working groups was debated, line by line. Many were endorsed without change. Some were altered and refined. By the end of the evening, the members had reached an agreement. The plan would reduce the deficit by $430 billion over five years without raising taxes or touching Social Security. It would ask most Americans to accept a little more responsibility for their own lives, rather than ceding it to the government, but it would impose no devastating sacrifice on anyone. Some early recommendations were altered in the process. For example, the working group dealing with natural resources recommended terminating funds for the superconducting supercollider. But the termination would make it virtually impossible for Texas Republicans to support our plan, so the recommendation was excluded from our final proposal. Similarly, an original working group proposal called for terminating the Economic Development Administration (EDA) and placing a moratorium on filling the Strategic Petroleum Reserve (SPR). Some Republicans could not accept both, so we struck a compromise: the EDA would be preserved, but the refilling of the SPR would be reduced by half. All committee Republicans accepted this agreement. Members of the empowerment group were troubled by the large expense incurred supporting programs for veterans -- about $35 billion a year and growing -- but acknowledged the larger political question of cutting them too deeply. Veterans are a natural Republican constituency; they tend to be relatively conservative on budget issues in general. Group members therefore sought modest restraints in this area. The working group dealing with health programs recognized the serious spending problem associated with Medicare. Specifically, the program's outlays are projected to grow from $130 billion in 1992 to $389 billion in 2002 if no policy changes are made. To strike a balance among what was possible in terms of budgetary goals, the need to maintain broad-based support for the Republican budget package, and the desire to protect the interests of senior citizens, the working group recommended $65 billion in Medicare savings over five years. Our plan had less net cost to the elderly than that of the Democrats, which will cost seniors about $80 billion over five years through increased Social Security taxes and Medicare charges. We also wanted to ensure that our cuts could not be challenged as unrealistic. We included nearly $49 billion in overhead savings over five years, a figure that may very well be understated. But by being conservative with our numbers (as well as our philosophy), we avoided charges that our proposals were not serious. Unchanged Cuts Recommendations that went unchanged included a moratorium on federal land purchases and the elimination of the subsidy for improvement of Amtrak's Northeast Corridor. Other key recommendations of our plan, an 84-page document titled Cutting Spending First, included: - WIC-PLUS. This reform combined the assistance for Women, Infants, and Children with other food and nutrition programs into a consolidated program funded through block grants to the states. Twelve percent of the program's fund would be guaranteed for WIC, constituting full funding, but states were given flexibility to allow funds to go to areas of greatest program need. - Medicaid. The Republican plan saved $10 billion over five years by making a fundamental change in the way Medicaid works. Medicaid recipients would be placed in managed-care systems, similar to what already is working successfully in Arizona. - Medicare. Members agreed it is good public policy to require wealthy individuals, those with incomes above $100,000 annually, to absorb a greater share for both their Medicare hospitalization coverage and their Medicare supplemental medical insurance. This policy would reduce the amount of subsidy these higher-income people would receive from other taxpayers. The reform saved $6 billion over five years. - Foreign Aid. The Republican plan proposed far-reaching changes that would have saved over $13.5 billion in the next five years. It cut funding for the Agency for International Development (AID); a presidential commission has already found that AID has too many objectives and supports too many programs. It terminated aid to 33 middle-income countries and to those low-income countries where U.S. assistance has shown no results. It also advocated program reforms to assure that U.S. aid did not become counter-productive in countries we were trying to help. - Federal Employees' Retirement. The committee members also determined that the current minimum retirement age of 55 for civilian federal employees is unrealistically low. Gradually increasing it to 62 would bring it more in line with the retirement age in the private sector. In addition, the cost-of-living-adjustment for military retirees would be deferred until the retirees reached age 62. (They now receive the COLA from the day they retire, even if they have as many as 20 working years left.) These reforms saved nearly $11 billion over five years. Sharp Partisan Contrast By the time our plan was ready for public release, the substantive differences between the Republican and Democratic strategies were clear. The president's plan, which became the framework for the Democrats' congressional budget resolution, contained the highest tax increase in American history including expanded taxes on Social Security benefits -- with almost no effort to restrain spending. Although the administration had promised to pursue a deficit-reduction ratio of $2 in spending cuts to every $1 in higher taxes, the first year of the Clinton budget called for $36 in tax increases for every $1.50 of spending restraint. Even over the full five years, higher taxes would outpace lower spending by two-to-one -- precisely the reverse of the president's initial promises. The president's campaign promise of cutting middle-class taxes also was reversed. Even his claim that the plan would impose 70 percent of its higher taxes on people making more than $100,000 annually turned out to be false. Actually, a large portion of his tax increases reached down to income levels as low as $30,000 a year. His most egregious tax, the so-called BTU tax, which fortunately has been dropped, would have taxed everyone's energy use. To put it simply, the president proposed to raise taxes on two kinds of people: people who are wealthy and people who breathe. His choice of spending restraint was remarkably one-sided as well. Of his net spending reductions, which totalled about $150 billion, nearly $112 billion were designated to come from national defense. These cuts would be in addition to the 25-percent defense reduction already required by the 1990 budget agreement. Nearly $60 billion of the president's deficit reduction would come from his estimates of savings in future interest on the national debt. At the same time, the president proposed $180 billion in new domestic spending initiatives, and in an Orwellian twist called them "investments." In fact, the president's plan actually increases domestic spending by $25 billion over five years. In other words, the "contributions" to Mr. Clinton's deficit reduction would come from America's armed services and American taxpayers; the favorite domestic programs of Democrat constituencies would continue to grow while everyone else was making sacrifices for the president's "Vision of Change." Contrasting the Republican plan was fairly simple. The Republican plan would achieve savings throughout the federal budget, not just in defense. It would achieve the same level of deficit reduction as the president claimed, and would do so without raising taxes and without touching Social Security. The Republican budget expressed the fundamental belief that reducing the deficit depended on restraining the growth of government outlays, not raising taxes. Support from the Press We now had a plan that sharply contrasted with that of the president and his fellow Democrats. Yet there were still questions among Republicans outside the Budget Committee about what to do next. Discussions with the Republican leadership were inconclusive. Most of the leadership team liked the plan; Republican Whip Newt Gingrich had supported the project from the beginning, and Republican Leader Bob Michel pledged to join Budget Committee Republicans on what he called a death march, if necessary, to support our plan on the House floor. But many Republicans were hesitant to present it publicly. Some also were concerned about the timing: would it be best to release our alternative in the committee or to hold back until the budget came up for debate on the House floor? Again, the concerns were understandable; we Republicans were in an unfamiliar role of opposing the White House, so there was uncertainty about how best to proceed. Nevertheless, the Republican Budget Committee members were determined to go forward. We held a news conference the evening before the markup session. The next day, we offered the full package as an alternative to the Democrat budget. The time, effort, and risks involved in describing our more than 160 budget recommendations proved worthwhile. News media throughout the country applauded our effort, even if some disagreed with some of its specifics. The New York Times wrote in an editorial: But when the House Budget Committee Republican members laid out 80 pages of detail for the committee yesterday, they were brushed aside with barely a nod. Their effort deserved better ... [their] plan isn't flawless, but it calls Mr. Clinton's bluff and deserves a serious airing.... The Republicans have made a good faith effort to enter the budget process this year. Their proposals deserve good faith debate. Four days later, syndicated columnist Patrick Buchanan added: "Diamond hard, packed with specifics -- real cuts and no new taxes -- it represents a serious Republican alternative, a clear choice." The comprehensive nature of our plan and the positive reaction from the press emboldened Republicans to support us. This was a large reason why our plan received 135 votes when it reached the floor (including three Democrats). The total was not enough to win passage, but it was the largest number of votes a Republican budget had received in at least five years -- including four when Republicans held the White House. In recent months, Ross Perot, who deserves considerable credit for having galvanized public opinion behind the need for deficit reduction, has applauded our effort, calling our proposal a "world-class plan." But even more important than that has been the response from the general public. My office in Washington received more than a thousand individual requests for copies of our plan in just two months. Our committee will pursue a similar course next year, in debating the budget for fiscal year 1995. In the meantime, we will seek to incorporate our recommendations into authorizing and appropriating legislation that comes to the House floor during the course of the year. We intend to use every opportunity to highlight our differences with the Democratic Party, and to assert our convictions about the proper ways to allocate limited federal resources, reduce chronic deficits, and restore balance in budgeting and government. JOHN R. KASICH, a sixth-term Republican, represents the 12th district of Ohio and is ranking minority member of the House Budget Committee. To reprint more than short quotations, please write or FAX Ben Morehead, Associate Publisher, Policy Review, 214 Massachusetts Avenue, NE, Washington, DC 20002, FAX (202) 675-1778.