*This is an archive page. The links are no longer being updated.
1994.02.15 : Effects of Balanced Budget Amendment on Social Security

FOR IMMEDIATE RELEASE              Contact:  HHS Press Office 
Tuesday, Feb. 15, 1994                       (202) 690-6343

       BALANCED BUDGET AMENDMENT WOULD INJURE OLDER AMERICANS 
                     AND THE NEEDY, SHALALA SAYS

     The proposed constitutional amendment requiring a balanced
budget each year would impact heavily on the neediest Americans,
with severe cuts likely in Social Security and other benefits, HHS
Secretary Donna E. Shalala told Congress today.

     Reductions in Social Security alone could push more than 1.5
million older Americans into poverty, she said.

     "This amendment would mean reneging on the security we have
promised our seniors and shredding the safety net we have held for
our disadvantaged," Secretary Shalala said in testimony before the
Senate Appropriations Committee.

     "It would take the security out of Social Security and the
care out of Medicare," she said.  "It would send Head Start back to
the starting gate."

     Shalala said the proposed amendment would tie the hands of
federal program administrators, preventing them from ameliorating
the effects of sudden massive budget cuts.

     "A balanced budget amendment would replace the tough choices 
we are making with no choices," the secretary said.  The amendment
would require automatic across-the-board cuts, foreclosing on
investment in programs which could prevent future costs, she
testified.  

     The effect of the proposed amendment would be especially
severe for elderly and low-income Americans, Shalala said:

     --   In the year 2000, if all programs were reduced
across-the-board, the amendment would require $52 billion in Social
Security cuts.  

     "We would have to freeze cost of living adjustments for about
the next four years to achieve this level of savings -- cuts that
could push more than one and a half million Americans into
poverty," she said.  Alternatively, benefits could be cut by more
than $90 per month, or the equivalent of more than an average
monthly check.

     --   Medicare benefits would also be reduced significantly
under automatic reductions triggered by the amendment.  And if
Social Security were exempted from the cuts required by the
amendment, much larger cuts would have to come from Medicare.  

     "The elderly would be faced with sizeable increases in their
out of pocket costs to pay for health care," Shalala testified. 
     --   For aged, blind and disabled recipients of Supplemental
Security Income, a 12 percent cut "would be the same as asking them
to live without about one-and-a-half months' worth of income," she
said.  More than 80 percent of SSI recipients are already well
below the poverty line.

     In other HHS programs, a 12 percent cut in the year 2000 would
put most HHS programs back to 1990 levels.  Effects could include: 

     *    cutting 137,000 pre-schoolers from Head Start.

     *    26 percent fewer research project grants at the National 
          Institutes of Health.  Alternatively, a 12 percent 
          reduction is the equivalent of eliminating nine NIH
          institutes or centers, or wiping out the entire AIDS
          research program.

     *    reduction of 22,000 drug treatment slots.

     *    reduction of 40 million meals for the aging, compared
          with the 240 million provided in *This is an archive page. The links are no longer being updated.
1994.

     Shalala also said the balanced budget amendment would make
health care reform impossible by using health savings for deficit
reduction instead of for reforms in the health care system.

     "A vote for the amendment is a vote to gouge Medicare and
Medicaid, rob savings designed to finance new benefits, such as the
drug benefit and the long-term care benefit for the elderly, and
destroy the promise of guaranteed private insurance for everyone,"
she said.

     "This is no symbolic vote for a future zero deficit," Shalala
testified.  "It's going to mean a real slap in the face for those
to whom the president has asked us to extend a helping hand."