Nick Smith, June 29, 2003

The House of Representatives voted to add a prescription drug benefit to Medicare on June 27. This vote, which would be the largest expansion of our entitlement programs since 1965, is among the most significant in the time I’ve been in Congress. The bill, H.R. 1, will now go before a House-Senate conference committee before it comes back for a final vote. I, for one, am concerned about the increased debt and unfunded liability.

Let’s review Washington’s wild spending. Increases have averaged 6.3% a year since 1996 and 7.7% since budget balance was reached in 1998. This is not keeping up with inflation; it is two to three times the rate of inflation. In 2000, spending was up four times the rate of inflation. It took 200 years to amass our first $450 billion of public debt. We’re now adding that much every year. We have to ask ourselves, how big do we want government to be? How much should government help those who can help themselves?

Dr. Thomas Sowell of the Hoover Institute says, ``Why should seniors be singled out to be subsidized by taxpayers [for prescription drugs], except that their votes are being sought after by both parties?'' I agree government should help those that really need it, regardless of age, and should not be an entitlement just because a person turns 65.

H.R. 1 is estimated to cost $400 billion for the first ten years. By 2013, this will produce a 12% increase in projected spending, adding enormous liabilities to a Medicare system which is already rushing toward insolvency. Economists calculate that the newly created unfunded liability of H.R. 1 is $7.5 trillion. This is a bit more than the entire public debt. You add this to an unfunded liability of $9 trillion for Social Security and you end up saddling our kids with a huge debt and obligations.

Even with H.R. 1, there’s still risk for seniors. When the baby boomers start to retire and Washington is short of money, cost savings will be considered. One possibility will be to force seniors into the program. Another could be following the lead of Canada and other countries by rationing which prescription drugs seniors are allowed to use.

Cost projections assume that prescription drug costs will grow no faster than the rest of Medicare, and that drug benefits will not be expanded over time. Recent history would suggest that prescription drug costs are growing more rapidly than the rest of Medicare. In 1965, OMB projected that Medicare would spend $9 billion in 1990. The actual figure was $67 billion. Having projected $26 billion in spending for 2003, we will actually spend $245 billion. These estimates for H.R. 1 are very conservative.

This drives home the point that expanding Medicare without reform imposes a huge cost on taxpayers. Because government is borrowing the money, it means that we are transferring program costs to our children and grandchildren. We’re spending now and sending the bill to people who are yet to be born or too young to defend themselves.

This is selfish and it is wrong. I’m not against a prescription drug benefit if it is responsible. But it must not place heavy and increasing burdens on future workers and taxpayers. I opposed H.R. 1 because it does not meet this test.

Congressman Nick Smith represents the 7th District Congressional of Michigan in the U.S. House of Representatives.