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MARCH 13, 2003
11:40 AM
CONTACT: Center on Budget and Policy Priorities 
Henry Griggs, 202-408-1080 Email:
Revised: House Republican Budget Contains Large Cuts in Medicare, Medicaid, and Other Domestic Programs
WASHINGTON - March 13 - Following is a revised version of a statement released yesterday by the Center on Budget and Policy Priorities on House budget cuts:

The budget that House Budget Committee Chairman Jim Nussle unveiled today contains deep and widespread cuts in basic domestic programs such as Medicare, Medicaid, veterans programs, student loans, school lunches, child care, food stamps, cash assistance for the elderly and disabled poor, and many other programs. (See the appendix for an explanation of the calculations used in the paper.) The budget would require Congressional committees to cut "mandatory" programs by $470 billion over the next ten years. If enacted, these would represent the deepest cuts in such programs in U.S. history.

The cuts are reminiscent of those proposed by former House Speaker Newt Gingrich in 1995 and included in the Contract with America budget legislation that President Clinton vetoed that year. While Chairman Nussle did not provide the specific amounts by which each program would be cut, his budget assumes cuts of a given percentage in all mandatory programs except Social Security and military retirement, and provides a figure to each Congressional committee that specifies how much that committee must cut mandatory programs in its jurisdiction. For example, the House Ways and Means Committee, which has jurisdiction over Medicare and various other, much smaller programs, would have to cut programs within its jurisdiction by $262 billion over ten years. The House Energy and Commerce Committee, which oversees Medicaid, would have to produce cuts of $111 billion,

If the committees cut all programs within their jurisdictions by the same percentage, the cuts would include: -- $214 billion in Medicare reductions over ten years (the budget also provides $400 billion for a Medicare prescription drug benefit); -- $93 billion in Medicaid, the basic health insurance program for low-income families, children, and elderly and disabled people; -- $15 billion in veterans programs; -- $12 billion in food stamps; and -- $7 billion in farm programs.

Deep cuts in Medicare and Medicaid would be unavoidable, as the Ways and Means Committee and the Energy and Commerce Committee would have no other way to come up with the reductions they would be required to make. The Nussle budget also would cut "discretionary" or non-entitlement programs (other than defense spending) well below the President's request. Non-defense discretionary programs would be cut $200 billion over ten years below the Congressional Budget Office baseline, which equals the 2003 levels for these programs, adjusted for inflation. These cuts could affect a wide variety of programs from education programs to environmental protection programs to programs for poor children.

While requiring deep cuts in domestic programs, the budget makes room for most of the President's large tax-cut package, including $1.4 trillion in tax cuts. The tax cuts in the President's "growth" package alone, all of which are included in the Nussle budget, would cost $725 billion over ten years and would, according to the Tax Policy Center, result in tax reductions averaging $90,000 each in 2003 for those Americans who have incomes of more than $1 million.

"Class warfare turns out to be alive," Center director Robert Greenstein commented. "It is a centerpiece of the Nussle budget, with deep budget cuts that could harshly affect the poor, the vulnerable, and many middle-class Americans, alongside lavish tax cuts for the nation's richest individuals. With this budget, we would be marching down the path toward a new Gilded Age."

"The Nussle budget serves one very useful purpose." Greenstein added. "It shows that these large tax cuts aren't free, and that at bottom, the issue is one of national priorities. This ought to trigger a national debate. Are tax cuts averaging $90,000 a year for millionaires so high a priority that we should cut health care programs, increase the ranks of the uninsured, reduce the cost or limit the availability of student loans, and increase hardship among the disabled, poor children, and others to free up room for massive tax cuts?"

APPENDIX: Calculating selected budget cuts in the House Budget Committee's plan

The budget resolution presented by Chairman Nussle to the House Budget Committee on March 12, 2003, assumes cuts in almost all entitlement programs. The Chairman indicated that he assumed entitlement programs would be reduced proportionally; he said this was the basis on which the figures for each budget "function"" and each "reconciliation target"" were derived.

At markup, the Chairman distributed a table showing the "reconciliation targets" for each committee -- i.e., the amounts by which each committee is required to reduce entitlement programs, relative to current law. He also distributed a table showing the resulting level of "mandatory" spending in each budget function. These tables show --

-- A $15 billion, ten-year reduction in veterans benefits (such as compensation, pensions, and education benefits). The reconciliation table shows that the Veterans Affairs Committee is required to cut programs within its jurisdiction by $15.1 billion.

-- A $214 billion, ten-year reduction in Medicare payments. In this case, the text of the budget resolution includes a special provision "reserving" $400 billion over ten years to pay for a prescription drug benefit, the amount requested by the President. The table of mandatory spending shows a total, ten-year level of spending in Function 570 (Medicare) that is $186 billion above the amount CBO says will be spent under current law. Because the net increase is $186 billion, the function total must consist of $400 billion in increases for prescription drugs and $214 billion in decreases for Medicare payments generally.

In addition, the total, ten-year level for mandatory spending in Function 570 is $215 billion below the President's level, as estimated by CBO, consistent with the conclusion that the budget plan calls for Medicare cuts of that magnitude, outside of a prescription drug benefit. Moreover, the reconciliation table shows the Ways and Means Committee is reduce entitlements $262 billion over ten years. Because Social Security is off budget for purposes of budget resolutions, Medicare is by far the largest remaining program under the that Committee's jurisdiction; it would be implausible for the Ways and Means Committee to cut entitlements under its jurisdiction by $262 billion unless a substantial portion of that amount was derived from reductions in Medicare.

-- A $12 billion, ten-year reduction in Food Stamp benefits and a $7 billion reduction in farm programs. The reconciliation table shows that the Agriculture Committee is required to cut programs within its jurisdiction by $19 billion. At the same time, the table of mandatory spending shows a total, ten-year level of spending in Function 350 (the budget function devoted to farm programs such as price supports and crop insurance) that is $7 billion below the amount CBO says will be spent under current law; payments to farmers must be cut by $7 billion. The Agriculture Committee therefore must cut entitlement programs outside of Function 350 by the remaining $12 billion. But the Agriculture Committee has jurisdiction over only one major program outside of function 350 -- Food Stamps, which is in Function 600 (Income Security). Thus, a $12 billion cut must be assumed in Food Stamps.

-- A $93 billion, ten-year reduction in Medicaid. The table of mandatory spending shows a total, ten-year level of spending in Function 550 (Health) that is $101 billion below the amount CBO says will be spent under current law; that is, payments for health entitlements other than Medicare(1) must be cut $101 billion. The health function contains a number of entitlements: Medicaid, the State Children's Health Insurance Program, health insurance subsidies for federal employees, etc. Medicaid constitutes about 93 percent of the entitlement spending in this function, and so its proportionate share of the $101 billion cut is $93 billion.


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