Federal Spending Controls Disappearing

Published June 1, 2005

In introducing his proposed budget for the 2006 fiscal year, President George W. Bush spoke of his commitment to spending controls, even though the budget calls for an overall spending increase of 3.6 percent.

Since Bush released his budget proposal on February 7, some of the key spending controls he cited have disappeared. By a 214 to 211 vote, the House on April 28 approved a $2.6 trillion budget that includes a $10 billion cut in Medicaid spending over the next five years–the House’s original proposal was for $20 billion in cuts–and a prior vote by the Senate has no Medicaid spending cuts, setting the stage for a possible budget stalemate.

Farm Spending Cuts Gone

On April 12, Agriculture Secretary Mike Johanns told members of the Senate Appropriations Committee panel on farm spending the administration would drop its plan to cut farm subsidies by $8 billion over 10 years.

Johanns’ announcement came less than one month after some Senate Republicans joined Democrats to delete $14 billion in proposed Medicaid reductions over the next five years.

“We acknowledge that many of these policy proposals, such as the reduction in the payment limit, are quite sensitive,” Johanns told committee members. “We recognize Congress may have other proposals to achieve these savings, and we are willing to work with the Congress on other cost-saving measures.”

The cuts in farm subsidies would have been accomplished by limiting payments to farmers to $250,000 a year, down from $360,000. Loopholes some farmers use to collect amounts far above the limits also would have been closed.

The subsidies go to farmers who produce certain agricultural crops or products, including corn, cotton, soybeans, and milk.

Farm groups immediately announced their opposition to the planned cuts, and farm-state lawmakers from both major political parties lobbied hard against the proposals.

Some Republican committee chairmen have suggested reducing spending in other parts of the Agriculture Department, including land conservation and nutrition programs.

Senate Rejects Medicaid Controls

On March 17 Senate Republicans and Democrats joined forces to remove proposed cuts in Medicaid spending from the Republican-controlled Senate Budget Committee recommendations. Seven Senate Republicans joined Democrats and the Senate’s lone independent in voting 52-48 to defeat the cuts.

Medicaid provides health care services to low-income persons and is jointly funded by states and the federal government. Many states are grappling with soaring Medicaid costs and opposed any cuts in federal funding.

“I applaud this vote and am pleased that the Senate listened to the bipartisan voices of many governors who warned against trying to reduce the federal deficit by cutting health care for our most vulnerable citizens,” said Louisiana Gov. Kathleen Babineaux Blanco (D) in an official statement.

Not everyone was pleased with the Senate’s action.

In a March 18 Washington Times article by reporter Stephen Dinan, Senate Budget Committee Chairman Judd Gregg (R-NH) said the Senate’s vote to restore the Medicaid spending will “gut the only thing in this budget which actually will generate fiscal discipline. And it’s being done by Republicans. You know, you just have to ask yourself how they get up in the morning and look in the mirror.”

Steve Stanek ([email protected]) is managing editor of Budget & Tax News.