February 11, 2005
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February 12, 2005
Bush Vows Veto of Any Cutback in Drug Benefit
By ROBERT PEAR
ASHINGTON, Feb. 11 - President Bush threatened on Friday to veto any bill that scales back Medicare's prescription drug benefit, which becomes available in January 2006 to millions of elderly and disabled people.
New estimates showing that the benefit will cost $724 billion over a decade have touched off a furor in Congress, where lawmakers originally believed that it would cost much less. Many members of Congress say they want to revisit the Medicare law this year. Conservatives seek cutbacks in benefits and cost controls. Liberals and some centrists want to require the government to negotiate prices with drug manufacturers.
But on Friday, Mr. Bush said, "I signed Medicare reform proudly, and any attempt to limit the choices of our seniors and to take away their prescription drug coverage under Medicare will meet my veto."
White House officials made clear that Mr. Bush would resist any fundamental change in the law, which he described Friday as "a landmark achievement."
The president spoke at a swearing-in ceremony for Michael O. Leavitt, the new secretary of health and human services. Mr. Bush presented himself as a protector of benefits long promised to the elderly, a stance that could work to his advantage in the coming battle over Social Security.
Mr. Bush's comments came three days after new data on the Medicare drug benefit showed costs far exceeding the original estimates by the White House and the Congressional Budget Office.
Members of Congress said on Friday that they intended to re-examine the law and would try to revise it, despite Mr. Bush's veto threat.
Representative Jeff Flake, Republican of Arizona, said he was surprised by the threat. But Mr. Flake said: "I cannot imagine the president would veto a bill that would more closely resemble what he originally wanted, a means-tested benefit to help low-income seniors who cannot afford their medicines. Congress larded up the president's request, and I hope he would not cast his first veto if Congress now acts more fiscally responsible."
Senator Olympia J. Snowe, Republican of Maine, said she would keep pushing legislation to require the government to negotiate prices with drug makers and a separate bill to legalize imports of lower-cost medicines from Canada and other countries.
Senator Ron Wyden, an Oregon Democrat who voted for the Medicare bill, said: "The prescription drug benefit is heading into a danger zone. It cannot stand much more bad news. The combination of rising cost estimates and confusion over the drug discount card is really ominous. In a belt-tightening environment, some members of Congress will want to throw this out and start all over again."
Representative Rahm Emanuel, Democrat of Illinois, said Mr. Bush's comments suggested that "he's nervous." Mr. Emanuel, the chairman of the campaign committee for House Democrats, said, "The president's base, the conservative base of the Republican Party, is upset with a bill that has thrown fiscal restraint out the window."
Many Medicare beneficiaries have said they see the drug benefit as inadequate. Supporters of the 2003 law say they do not want to scale back that benefit at the same time Congress is considering reductions in guaranteed Social Security benefits, as part of Mr. Bush's plan to remake the giant pension program for the elderly.
House Republican leaders and White House officials won passage of the Medicare bill in November 2003 by assuring wavering lawmakers that it would cost no more than $400 billion from 2004 to 2013. In January 2004, the White House put the price tag at $534 billion.
This week the Bush administration said the cost would total $724 billion from 2006 to 2015 - a different period, reflecting increases in enrollment and higher drug prices in later years. The chief Medicare actuary predicts that spending on the drug benefit will be growing 11 percent a year by 2013 and will reach $109 billion in 2015.
Details of the drug benefit are likely to be a subject of fierce debate in Congress until the coverage starts on Jan. 1. Medicare officials worry that the debate, including constant criticism of the law by many Democrats, may discourage elderly people from signing up.
The law authorizes the biggest expansion of Medicare since its creation in 1965. Besides providing a drug benefit, the law creates new managed-care options and increases payments to private insurers as an incentive to enter the Medicare market.
"This law is a landmark achievement in American health care, and millions of older Americans are already benefiting from its reforms," Mr. Bush said, referring to the drug discount card and new coverage for an initial physical examination and screenings for diabetes and high cholesterol.
President Bush has not vetoed any bills. A year ago, in his State of the Union address, he vowed to block changes in the Medicare law, and his words were similar to those used on Friday.
"I signed this measure proudly, and any attempt to limit the choices of our seniors, or to take away their prescription drug coverage under Medicare, will meet my veto," Mr. Bush said in his address to Congress on Jan. 20, 2004.
But the statement did not resonate then as it did on Friday, because it was made at the beginning of an election year, and criticism of the new law was coming from Democrats who wanted to discredit Mr. Bush's record.
Now many Republicans, including Senator Judd Gregg of New Hampshire, the chairman of the Senate Budget Committee, are saying that Congress should pass legislation to ensure that the drug benefit does not cost more than the original estimate of $400 billion.
Scott McClellan, the White House press secretary, said the veto threat was not aimed at a specific proposal. "The president," he said, "was making a general statement," a "very strong statement," that Congress should not tamper with the law.
"The president was making very clear to America's seniors that we stand with you, we made a promise to you, and we're going to keep that promise," Mr. McClellan said. "He's not going to let anybody take away what we have provided to you."
Mr. McClellan accused Democrats of trying to "undermine the reforms that we put in place." But proposals to rethink the drug benefit have also come from influential Republicans.
February 11, 2005
OP-ED COLUMNIST
Bush's Class-War Budget
By PAUL KRUGMAN
t may sound shrill to describe President Bush as someone who takes food from the mouths of babes and gives the proceeds to his millionaire friends. Yet his latest budget proposal is top-down class warfare in action. And it offers the Democrats an opportunity, if they're willing to take it.
First, the facts: the budget proposal really does take food from the mouths of babes. One of the proposed spending cuts would make it harder for working families with children to receive food stamps, terminating aid for about 300,000 people. Another would deny child care assistance to about 300,000 children, again in low-income working families.
And the budget really does shower largesse on millionaires even as it punishes the needy. For example, the Center on Budget and Policy Priorities informs us that even as the administration demands spending cuts, it will proceed with the phaseout of two little-known tax provisions - originally put in place under the first President George Bush - that limit deductions and exemptions for high-income households.
More than half of the benefits from this backdoor tax cut would go to people with incomes of more than a million dollars; 97 percent would go to people with incomes exceeding $200,000.
It so happens that the number of taxpayers with more than $1 million in annual income is about the same as the number of people who would have their food stamps cut off under the Bush proposal. But it costs a lot more to give a millionaire a break than to put food on a low-income family's table: eliminating limits on deductions and exemptions would give taxpayers with incomes over $1 million an average tax cut of more than $19,000.
It's like that all the way through. On one side, the budget calls for program cuts that are small change compared with the budget deficit, yet will harm hundreds of thousands of the most vulnerable Americans. On the other side, it calls for making tax cuts for the wealthy permanent, and for new tax breaks for the affluent in the form of tax-sheltered accounts and more liberal rules for deductions.
The question is whether the relentless mean-spiritedness of this budget finally awakens the public to the true cost of Mr. Bush's tax policy.
Until now, the administration has been able to get away with the pretense that it can offset the revenue loss from tax cuts with benign spending restraint. That's because until now, "restraint" was an abstract concept, not tied to specific actions, making it seem as if spending cuts would hurt only a few special interest groups.
But here we are with the first demonstration of restraint in action, and look what's on the chopping block, selected for big cuts: the Centers for Disease Control and Prevention, health insurance for children and aid to law enforcement. (Yes, Mr. Bush proposes to cut farm subsidies, which are truly wasteful. Let's see how much political capital he spends on that proposal.)
Until now, the administration has also been able to pretend that the budget deficit isn't an important issue so the role of tax cuts in causing that deficit can be ignored. But Mr. Bush has at last conceded that the deficit is indeed a major problem.
Why shouldn't the affluent, who have done so well from Mr. Bush's policies, pay part of the price of dealing with that problem?
Here's a comparison: the Bush budget proposal would cut domestic discretionary spending, adjusted for inflation, by 16 percent over the next five years. That would mean savage cuts in education, health care, veterans' benefits and environmental protection. Yet these cuts would save only about $66 billion per year, about one-sixth of the budget deficit.
On the other side, a rollback of Mr. Bush's cuts in tax rates for high-income brackets, on capital gains and on dividend income would yield more than $120 billion per year in extra revenue - eliminating almost a third of the budget deficit - yet have hardly any effect on middle-income families. (Estimates from the Tax Policy Center of the Urban Institute and the Brookings Institution show that such a rollback would cost families with incomes between $25,000 and $80,000 an average of $156.)
Why, then, shouldn't a rollback of high-end tax cuts be on the table?
Democrats have surprised the Bush administration, and themselves, by effectively pushing back against Mr. Bush's attempt to dismantle Social Security. It's time for them to broaden their opposition, and push back against Mr. Bush's tax policy.
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U.S. Trade Deficit Hits All-Time High
February 10, 2005 3:01 PM EST
WASHINGTON - The U.S. trade deficit ballooned to an all-time high of $617.7 billion last year, pushed by soaring oil prices and Americans' insatiable appetite for everything foreign, from cars to toys and food.
The Commerce Department reported Thursday that the 2004 imbalance rose 24.4 percent from the previous year and marked the third year in a row that the deficit had set a record. The imbalance with China swelled by 30.5 percent to $162 billion, the highest ever with any country.
For December, the deficit actually shrank. But at $56.4 billion, it still was the second worst monthly showing ever, down 4.9 percent from $59.3 billion in November.
Democrats said the figures were evidence that President Bush's policy of seeking trade deals was not working. They said the 2.7 million manufacturing jobs the United States has lost over the past four years reflect in large part unfair trading practices by China and other countries.
Sen. Byron Dorgan, D-N.D., said the report was "devastating news for the American economy." House Democratic leader Nancy Pelosi of California said the deficits were undermining the U.S. manufacturing base.
Added John Sweeney, the AFL-CIO's president: "America is losing good jobs due to bad trade deals."
Sen. Charles Schumer, D-N.Y., said the imbalance with China showed the need for his legislation that would impose across-the-board tariffs of 27.5 percent on Chinese products unless Beijing stopped tightly linking its currency, the yuan, to the U.S. dollar.
American manufacturers says this policy has undervalued the yuan by as much as 40 percent, giving Chinese companies a huge competitive advantage.
Treasury Secretary John Snow told Congress on Thursday that he believed the administration's efforts to prod China to develop a more flexible currency system were bearing results.
America's major trading partners, he said, had to grow faster and the United States must work to boost national savings in order to dampen excess demand that is being met by foreign goods.
"It sure would be helpful if Japan and our other trading partners would grow faster," Snow said.
Private economists said the country's low savings rate was worsening because of the government's record budget deficits. They predicted the trade deficit for 2005 would set a record, but that the deterioration would begin to slow and lower deficit would result in 2006.
"The nation is hemorrhaging red ink and we are seeing the worst of it right now," said Mark Zandi, chief economist at Economy.com. "The trade deficit should stabilize this year and with a little bit of luck, it should start to improve in 2006."
For all of 2004, U.S. exports of goods and services rose 12.3 percent to $1.15 trillion. But imports rose at an even faster clip of 16.3 percent, setting a record of $1.76 trillion.
The demand for foreign goods was led by a 35.7 percent surge in foreign petroleum imports, which climbed to a record $180.7 billion. The increase reflected not only higher demand but also surging prices. For the whole year, the average per barrel price for imported crude was $34.47, compared with $26.98 in 2003.
Imports of foreign autos, industrial supplies and consumer goods all set records. So did imports of food products, which climbed to $62.17 billion.
U.S. exports of food products reached a record $56.3 billion. But because U.S. shipments abroad were lower than imports, the country recorded a $5.9 billion deficit in food. It was the third straight annual deficit in agriculture, which had been an important source for helping narrow the deficit in manufactured goods.
U.S. exports did climb to an all-time high. Shipments of U.S. food, autos and consumer goods set records, helped by a 15 percent decline in the value of the dollar over the past three years. A weaker dollar makes U.S. products cheaper and thus more competitive on overseas markets.
The deficit with China was up from a record of $124.1 billion. The United States also saw large increases in the deficits with Japan, at $75.2 billion, Canada at $65.8 billion and the 25-nation European Union, where the deficit rose to $110 billion.
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