By leaving Social Security programs untouched and backing away from large hikes in Medicare premiums, the budget package slowly emerging from Congress could widen the gap in federal spending on old and young Americans, especially poor children.
"The 800-pound gorilla still has all his bananas, doesn't he?" said one budget expert who was involved in the budget summit.
The "gorilla" -- the block of Americans 65 and over -- will only devour bigger and bigger shares of federal spending as its numbers and voting power grow. Privately, many lawmakers worry that if the deficit-reduction package fails to attack entitlement programs for senior citizens, an important opportunity will have been missed. Demographics will only make senior citizens a more potent constituency in the future.
"Old persons vote. Children don't vote. That much is a simple fact," said Sen. Daniel Patrick Moynihan (D-N.Y.). "For people with the franchise, this a tremendously responsive system."
Spending on young Americans, especially children in poverty, is declining. For the elderly it is rising.
Earlier this year, the Congressional Budget Office estimated that after military spending and interest payments are factored out, federal spending on people 65 and over made up about 47 percent of the budget. That share will rise above half of domestic nonmilitary discretionary spending by 1995.
Yet the deficit-reduction plan crafted in the prolonged budget summit avoided changes in the Social Security program, considered the third rail of politics -- "touch it and you die," they say. Negotiators at the summit even abandoned a relatively modest proposal for taxing a bigger portion of Social Security benefits going to wealthier senior citizens. Negotiators concluded that the revenue they would have generated would not be worth the political pain that would have ensued.
The summit's proposal for slowing the growth in Medicare spending provoked such outrage from Congress and senior citizens that it is one of the main reasons the deal was defeated in the House. The new proposals will likely feature much smaller reductions in projected Medicare spending.
In the budget deal, even the inclusion of excise taxes and a proposed cut in the effective capital gains tax rate would help the relative position of older Americans. On average, people 65 and over drink, smoke and drive less than younger people. They also take more capital gains -- income from the sale of stock, land and other assets. About 13 percent of people 65 and over took capital gains in 1987, according to the CBO, compared to about 9 percent of people below 65.
"The elderly could get off lightly," said Robert D. Reischauer, CBO director.
Senior citizen groups defend Social Security and Medicare spending programs, arguing that most senior citizens live on modest incomes and that the two entitlement programs keep the burden of supporting the aged off their younger relatives.
Moreover, many senior citizens have paid Social Security taxes their entire lives, and the program is currently running a surplus of more than $1 billion a week.
"You don't make social progress by taking things away from one group to give to another," said Moynihan. "It is a zero sum game that makes everyone unhappy."
Others say the government must bring the size of Social Security and Medicare under control. "Everyone knows that the entitlements are the biggest problem on the spending side" of the budget, said Kevin Phillips, a political analyst. "Everyone treats that as a cliche and then everyone says 'Hands off Social Security and Medicare.' "
The reluctance to deal with those two programs reflects in part, at least, the political power of older voters. People 65 and over vote far more often than those younger, especially in off-year congressional elections. In 1986, 60.9 percent of people 65 and over voted, while turnout among people between 18 and 24 was only 21.9 percent, and among people aged 25 to 44 it was 41.4 percent.
Older Americans also are organized and outspoken. Families USA, a group that is organizing seniors, recently supplied newspapers with ready-made examples of the effects of fiscal policy. In an "advisory to assignment editors and reporters covering the budget summit," the group said "a limited number of real life potential victims of these proposed cuts are available (in every region of the U.S.) for interview."
Last year, when Congress passed a supplemental fee on wealthy senior citizens to provide "catastrophic" health insurance to all older Americans, a revolt by the would-be taxpayers forced a hasty repeal. In one incident, a group of senior citizens bodily blocked the car of Rep. Dan Rostenkowski (D-Ill.). At a leadership meeting after the budget summit agreement failed, Rostenkowski referred to himself as "someone who has personal experience peeling old folks off the hood of my car."
The catastrophic health insurance episode was "just about the biggest rolling Congress has suffered in the last decade," said Phillips. "When they shook Rosty's car, they shook more than his car. They shook the willingness of politicians to confront retirees."
"The ghost of catastrophic stalked the halls" during the budget summit, said one participant in the talks. "If I had a dollar for every time someone mentioned catastrophic, I'd be in Hawaii."
Children, 22 percent of whom live with families in poverty, have little chance to make their voices heard in budget considerations.
While senior citizen groups have beaten back efforts to trim the cost of living adjustments that keep Social Security benefits in line with inflation, children who receive similar benefits under the Aid to Families with Dependent Children (AFDC) program have not done as well with the government. According to the Children's Defense Fund, the value of AFDC assistance has declined by 40 percent since 1970 because it has not been adjusted for inflation.
Under Medicaid, the joint federal and state health program for the poor, the proportion of children eligible for benefits has shrunk while the proportion of eligible senior citizens has increased. One million children have lost benefits, the Children's Defense Fund said.
Another example of crimps in spending on younger Americans is the stalemate over the child care bill. Sen. Lloyd Bentsen (D-Tex.), chairman of the Senate Finance Committee, wants to include an expanded earned income tax credit -- a tax break for lower income Americans -- and an extension of the telephone tax to pay for expanded child care services. Republicans see this as an expansion of social spending that would hurt the drive for deficit reduction and want it in another bill.
Administration officials are frustrated with the protest against Medicare cuts, which they and others say are largely misunderstood.
"I have customers who are worried to death that they are going to lose Medicare benefits. I don't think they understand," said Herb Kay, a white-haired pharmacist on Columbia Road in the District. "If people realized how much of a benefit this was," he added, they wouldn't complain as much. "No company would even write them an insurance policy," he said.
There are two parts to the Medicare program: Part A and Part B. Part A is mandatory. It is funded by a 1.45 percent payroll tax that is part of the 7.65 percent FICA tax taken from paychecks, and it covers hospital costs for elderly and disabled Americans. That program is fully funded by the targeted tax, though the trust fund is expected to run out of money early in the next century. Most budget plans envision $30 billion in savings over five years by reducing the fees the government pays to health providers.
Part B is a voluntary insurance program to cover doctors' costs for 33 million elderly and disabled Americans. Senior citizens pay premiums that cover part of the program's cost. The rest is subsidized from general tax revenues. When the program was set up in 1965, the cost of the insurance fund was supposed to be evenly split between premiums and subsidies. Since then, however, because of rising health care costs and improved medical technology, the subsidy has grown to 75 percent of outlays.
Because of rising medical costs, the price of Medicare Part B is going to increase for beneficiaries and the government no matter what budget plan is adopted. That is the root of the problem. Budget planners zero in on Medicare because it is the fastest growing part of the federal budget. But individuals similarly feel pressed by increased costs.
When budget planners talk about "cuts" in Medicare, they are talking about slowing the rate in growth of government subsidies. Without any change, government spending on Plan B would rise at a rate of 11.5 percent a year over the next five years. Under the budget summit agreement the House defeated, spending on the program would have still grown at a rate of about 10 percent a year.
The current subsidy comes to $3,070 per beneficiary in 1991 and, without any change, to about $18,900 per person over the next five years. The budget summit deal would have cut the subsidy to $17,500 over five years, saving the government $30 billion.
"The other side of the argument is that health care costs are going up quickly," said John Rother, director of legislation and public policy at the American Association of Retired Persons (AARP). "In that sense, seniors are losing ground anyway."
Under the budget summit proposal, premiums would have nearly doubled, from $28.60 a month last year to about $54 in fiscal 1995.
"I think for a lot of people that extra $7 a month can mean something," said pharmacist Kay, referring to the proposed premium increase for next year. Some of his customers who are poor enough to qualify for Medicaid cannot even make the nominal 50-cent co-payment required for prescriptions. But, he added, "many people on Medicare can afford the extra amount."
One-third of senior citizens make more than $25,000 a year, or $32,000 per couple. If the government subsidized 50 percent of their Medicare costs, instead of 75 percent, it would save more than $10 billion over five years.
Conscious of the growing needs of children in poverty, senior citizens' groups have shown some sympathy for the idea of trimming benefits programs for wealthier seniors. They have also been supportive of programs aimed at children. "We don't make any effort to portray that as an either/or choice," said Rother of the AARP.
But Moynihan warns that "the budget of the United States is not going to be a source of any significant new spending initiatives for the rest of this century. We went broke in the last decade, and we're going to stay broke."