The projected surplus depends on revenue assumptions that are reasonable. But it also depends on a grossly optimistic assumption: that Congress and the White House will resist the itch to spend, no small concern given the fact that, this week alone, President Clinton has proposed a staggering array of expensive new initiatives.
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.