What Clinton can learn from Bill’s 1997 budget deal
LAS VEGAS — Hillary Clinton’s rejection of cuts to Social Security and Medicare ranks high on the list of issues on which she’s moved to Bill Clinton’s left. But reversing that, and learning from her husband’s willingness to challenge Democrats on entitlement reform, may be the key to advancing her own agenda if she wins the White House.
The lesson is embedded in the 1997 budget deal that Bill Clinton reached with a GOP Congress. Their agreement created the State Children’s Health Insurance Program, which Hillary Clinton often cites to show she will work across party lines. In that deal, Bill Clinton linked new spending on kids not to additional taxes, but to savings in entitlements for seniors. With that maneuver, he subtly shifted the debate away from increasing or shrinking spending toward recalibrating the way the budget balanced the needs of contrasting generations. A similar reframing may offer Hillary Clinton her best chance to avoid stalemate if, as it appears now, Republicans retain their House majority even if Clinton takes the White House and Democrats recapture the Senate.
The S-CHIP program, which provided health insurance to children in working-poor families, fits the central thrust in Hillary Clinton’s domestic agenda. Throughout the campaign, Clinton has proposed to invest in kids at all stages of their development: with grants to states to create universal access to preschool; expanded tax benefits for families (especially very low-income ones) with children; new child-care subsidies; and free tuition at public colleges and universities for families earning less than $125,000 annually. It’s a comprehensive, integrated plan for equipping more of America’s increasingly diverse future workforce with the skills to reach the middle class.
It’s also a plan very easy for congressional Republicans to oppose. Clinton pays for her ambitious investments with an array of new taxes, from a surtax on multimillionaires to limits on deductions for big earners. Maybe she will win so big that Republicans will fear stonewalling her. More likely, House and Senate Republicans will feel entirely comfortable rejecting any new spending that requires new taxes.
Here is where the 1997 agreement could provide an alternative model. In that deal, Bill Clinton funded the S-CHIP program by slowing the growth Medicare spending. The deal didn’t raise taxes or enlarge the deficit; in fact, it pointed Washington toward the most recent balanced budgets it has achieved.
If anything, the need to rebalance the federal budget toward kids has only grown since then. Washington spends more than $6 per capita on seniors for every $1 it spends on children, according to the Urban Institute’s latest Kids’ Share report. Even including state and local expenditures, which captures most education spending, governments still spend more than twice as much on each senior as on each child.
Looking forward, as the baby boom cascades into retirement, spending on retirees will increasingly squeeze other priorities. Total federal spending is expected to increase over the next decade by $1.5 trillion. But as the Urban Institute calculated, spending on the adult portions of Social Security, Medicare and Medicaid will consume nearly three-fifths of that torrent, with interest on federal debt claiming much of the rest. Programs for children, it reports, will receive “just 2 cents of every dollar of the projected increase.”
That’s myopic not only for kids, but also seniors. America’s rising generations are by far the most diverse in U.S. history: Kids of color will make up a majority of the under-19 population by around 2020. They are the country’s future consumers, workers and critically, taxpayers — the people who will be paying for Social Security and Medicare in the future.
Yet today, roughly one-third of both African American and Latino kids live in poverty and about three-fourths of both groups attend schools of concentrated poverty where most of their classmates qualify as poor or low-income. Not coincidentally, the share of black and brown kids who rank as proficient in reading or math, or graduate from high school on time, still lags well behind the numbers for whites.
That’s an ominous trend, most immediately for those communities but ultimately also for older workers and retirees. The shared economic interests between diverse younger generations and preponderantly white older ones — what I’ve called “the brown and the gray” — could allow a President Clinton to offer congressional Republicans this deal: restraints on Medicare spending targeted at upper-income seniors (such as higher premiums for the most affluent) in order to invest in kids.
Eventually, the increasing number of seniors will demand some tax increases to preserve the retirement safety net. But in the near term, a tax-neutral agreement that linked new investment in kids to limits on future spending for seniors could shake the budget debate from its calcified stalemate and allow each side to advance a key fiscal goal. As important, it would ground Washington’s budget strategy in the overdue recognition that without more economic opportunity for the brown, there is no financial security for the gray.
The need to rebalance the federal budget toward kids has only grown.