Exhibit A is Medicare. The president is proposing a massive expansion of a program that’s already deeply in trouble because of exploding costs. Even if Congress does the right thing and rejects Mr. Clinton’s scheme out of hand, there’s an excellent chance that Medicare will make any budget surplus disappear. Last year’s budget deal assumes savings in Medicare as a result of new price controls on doctors and hospitals. A long and grisly history of similar efforts shows conclusively that price controls don’t work in health care or anywhere else. But that’s a lesson that Congress simply refuses to learn. In the meantime, implicit debt under Social Security and Medicare is increasing relentlessly. Social Security’s unfunded liability is already more than $9 trillion, and Medicare’s is more than $7 trillion.
If by some miracle a federal budget surplus does materialize, under no circumstances should the president and Congress be allowed to use it to buy more goodies for favored constituencies. Rather, it should be used in only two ways: to cut taxes or to finance a transition to a privatized Social Security system, or both.