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Cato Daily Dispatch for October 25, 2002

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Report: Next Attack Could Top 9/11
Bush administration says 2002 deficit hit $159 billion
Lower Medicare Payouts Concern Bush Officials

Report: Next Attack Could Top 9/11

According to the Associated Press, a report by former top government officials warns that the United States ains "dangerously unprepared" to deal with another major terrorist attack.

"In all likelihood, the next attack will result in even greater casualties and widespread disruption to American lives and the economy" than the Sept. 11 attacks, said the task force chaired by former Sens. Gary Hart (D-CO) and Warren Rudman (R-NH). The report was released late Thursday.

The report comes a week after CIA Director George Tenet warned that Osama bin Laden's al-Qaeda network is likely to strike against the United States sometime soon and that the current situation is similar to what existed before the Sept. 11 attacks. Tenet previously said a terrorist attack would be more likely if the U.S. takes military action against Iraq.

Cato Defense Policy Analyst Charles Pena expressed doubts about the report, saying that "the post-9/11 reality is that America will continue to be vulnerable to terrorism. The U.S. can and should take reasonable and prudent measures to protect against terrorism, but this will only be effective at the margins. No amount of homeland security -- including creating a new cabinet level department -- will be able to prevent a determined terrorist enemy from eventually succeeding. In the long run, U.S. homeland security will be better served by a less interventionist defense and foreign policy to minimize anti-American sentiment and avoid making needless enemies."

Bush administration says 2002 deficit hit $159 billion

The government ran a $159 billion deficit in the fiscal year just ended, reports the Associated Press. The Bush administration announced the figure Thursday, punctuating one of the federal budget's worst nosedives ever, just 12 days before congressional elections.

The amount was not a surprise and largely reflected an ongoing dip in federal revenue collections. But it was nonetheless breathtaking for its contrast with the $127 billion surplus -the second largest ever - shown by the government's books just a year before.

Though Democrats hope the budget's deterioration will help them in next month's elections, many analysts and officials from both parties believe the return of deficits after four straight years of surpluses will have a minimal political impact. That is because the public seems more focused on the flagging economy and the threat of terrorism and blames them - not politicians - for the revived red ink.

In a written statement, White House Budget Director Mitchell Daniels blamed the red ink on needed defense and domestic security expenditures, and the end of a federal revenue surge fed by the booming economy of the late 1990s.

"Given these two developments, it is absolutely essential that we set aside business as usual and keep tight control over all other spending," he added, repeating a demand the administration has often made of Congress.

Cato's director of fiscal policy, Chris Edwards, notes: "I am skeptical that the administration will really fight to keep control of nondefense spending." Edwards added, "federal education outlays have risen from $36 billion in fiscal 2001 to an estimated $56 billion in fiscal 2003 under this administration -- that's not exactly 'tight control.'"

Edwards observed that "substantial spending increases between 2001 and 2003 are a pattern across nearly every department under this administration including agriculture, energy, health and human services, labor, state, veteran affairs, and others."

Lower Medicare Payouts Concern Bush Officials

The New York Times reports that Bush administration officials say they have become deeply concerned that a cut in Medicare payments to doctors, to be announced next week, will prompt many doctors to limit their participation in the program, reducing access to health care for the elderly.

Medicare payments to doctors were cut 5.4 percent in January, and Medicare officials said that next week they expected to announce a further cut of 4.4 percent, effective on Jan. 1.

Asked to describe the likely effects, Thomas A. Scully, administrator of the Medicare program, said: "You'll have mad doctors. There will be access problems, and seniors will feel it." Darrin T. Ocke, a spokesman for the Medical Society of the State of New York, said: "If Congress stops the erosion of Medicare payments, doctors will renew their commitment to the program. But if it's not fixed, there is a real likelihood of major service disruptions after Jan. 1."

The Cato Institute has published a book, "Medicare's Midlife Crisis," in which author Sue A. Blevins reveals that most Americans, and even most seniors, know little or nothing about Medicare and the efforts being made to reform it. She examines the program's origins, evolution, and future policy options, pointing out how Medicare costs grew far beyond the original estimates used to muster political support for the program in the 1960s. She finds that Medicare restricts health care choices, jeopardizes the doctor-patient relationship, and threatens to invade the medical privacy of seniors.

Jonathan Block, editor, jblock@cato.org