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 Washington Notebook

February 10, 2005
Vol. 2, No. 6

Joe Feuerherd, NCR Washington correspondent


Because so much of federal spending is either statutorily (interest on the debt) or politically (military spending) untouchable, advocates of education get pitted against supporters of child nutrition, where supporters of low-income housing (jurisdiction for which lies in the same appropriations subcommittee as NASA's budget) compete with advocates of space exploration.

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Proposed budget goes back to the future

By Joe Feuerherd

The conservative president's tax cuts starve the federal government of revenue forcing record high deficits for "as far as the eye can see." Military budgets skyrocket while large cuts in "domestic discretionary" are proposed. Entitlement disbursements -- mostly for medical care for the elderly (Medicare) and the poor (Medicaid) -- loom as major unfunded liabilities on government balance sheets.

This is not, despite the eerie similarities, George W. Bush's Washington. It's Ronald Reagan's, and the year is 1986.

As a young legislative assistant to then-New York Representative Tom Downey, I had a front-row seat for the budget battles of the mid-1980s. I wasn't a participant -- that was left to the members of Congress and the high-level committee staff who actually understood the intricacies of federal budgeting. I was, rather, a fly-on-the-wall, taking notes for my boss when he missed a meeting (Downey was also a member of the Ways and Means Committee, so his priority was dealing with Reagan's tax reform proposal) and educating myself so I could speak intelligently with visiting Long Island constituents concerned about funding for programs they favored.

It was a glorious spot for a 23-year-old political junkie -- the first time I'd had a seat (though it was against the wall and not at the table) behind the closed doors of a smoke-filled room. And the haze was substantial, thanks mostly to Rep. Marvin Leath, a well-liked Kent-toking conservative Texas Democrat, and chain-smokers Martin Sabo, a Minnesota liberal, and Ed Jenkins, a smart soft-spoken Georgian.

The Budget Committee Democrats, led by Pennsylvania Rep. William Gray (now president of the United Negro College Fund), had one job: present and pass, in the Democratic-controlled House, an alternative to President Reagan's budget. The details of the Budget Resolution were hammered out, no Republicans present, in a conference room just off the House Floor. Evening meetings were common -- and word among the staff was that some of the members took a libational break prior to the 6:30 p.m. sessions.

This year's budget realities might drive today's more abstemious crop of legislators to drink.

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The numbers are larger. The $990 billion 1986 budget contained a $221 billion deficit, while the president's proposed $2.57 trillion 2006 budget anticipates a deficit of $390 billion plus the cost of fighting the war in Iraq. The fiscal realities, however, are comparable.

First, as amazing as it sounds, Congress and the president actually have relatively little say over how much the government spends. Today, annual interest payments on the national debt -- a nonnegotiable item -- amount to more than 7 percent of the budget. Short of a government default, that's money that must be spent.

Next, entitlement spending -- programs like Social Security, Medicare and Medicaid -- account for more than half of all federal spending. They are called "entitlements" because people are "entitled" to them if they meet the eligibility criteria -- like the 62-year-old who retires and starts collecting Social Security or the aging cancer patient whose treatments are covered by Medicare. Reducing entitlement spending significantly by changing eligibility criteria is like steering an aircraft carrier through shallow water -- possible, but neither likely nor, to most minds, desirable. (Bush's budget, however, does target the most vulnerable of the entitlement programs, Medicaid, for $45 billion in cuts over the next decade.)

Third, there's the $419 billion proposed military budget, which takes more than 20 cents of every taxpayer dollar. The president's proposal would increase Pentagon spending nearly 5 percent over current expenditures, up 41 percent since 2001. (And this doesn't include the cost of ongoing conflict in Iraq and Afghanistan, which will be paid for through a "supplemental" budget request). At a time when the "war on terror" reigns foremost in the minds of both the public and politicians, there is no political will, none, to substantially reduce that request. (This is different from 1986. Reagan's huge military build-up occurred largely in his first term. By 1986, most Democrats and a good number of Republicans favored reductions in the Pentagon budget.)

On the revenue side of the equation, Bush is more adamant than even Reagan (or his father for that matter) in rejecting new taxes, or, as the Republicans used to call them, "revenue enhancements." In fact, Bush proposes to make his previous tax cuts permanent, draining federal coffers of $1.9 trillion over the next decade.

Which leaves the budgeters to fight over the remaining 20 percent of the budget -- so-called domestic discretionary spending. This includes everything else the federal government does, from homeland security (a big winner in the president's proposal) to education, agriculture, nutrition, housing, scientific research, NASA, the National Park Service, and so on and so on.

If the House and Senate Budget Committees keep to their schedules (and more often than not they don't), both bodies will pass budget resolutions this spring that establish the broad outlines from which the appropriations committees direct spending to specific programs. This is where, because so much of federal spending is either statutorily (interest on the debt) or politically (military spending) untouchable, advocates of education get pitted against supporters of child nutrition, where supporters of low-income housing (jurisdiction for which lies in the same appropriations subcommittee as NASA's budget) compete with advocates of space exploration.

It's an ugly process.

In 1986, Congress operated under the so-called Gramm-Rudman-Hollings law, a stop-me-before-I-spend provision that provided for across-the-board cuts in discretionary spending (both military and domestic) if Congress failed to reach deficit reduction targets. That worked for a while. Then, in 1990, President George H.W. Bush and the Democratic House and Senate agreed to a combination of tax increases and spending cuts to further reduce the deficit. (Many believe that Bush's flip-flop on his famous "no new taxes" campaign pledge cost him the 1992 election).

That was followed in 1993 by Bill Clinton's pushing through additional tax increases (raising, for example, the top income tax rate) and spending restrictions on a strict party-line vote. Meanwhile, the long-since-forgotten "peace dividend" -- a result of the collapse of the Soviet Union -- and robust economic growth fueled a prosperity that filled the government till.

By 1998, the annual deficit was gone, but so was Democratic control of the House of Representatives. There's a high political price to pay for fiscal constraint.

And what of today's Republican-controlled Congress? In the decade since the Newt Gingrich-led Republican Revolution took over the House the party has shifted. Burned by Clinton's refusal to back down on his budget priorities in the mid-1990s (the government shutdown forced by that impasse redounded to Clinton's benefit, not Gingrich's), the Republicans became "big government conservatives." During his first term, Bush vetoed not a single appropriation bill, used up an anticipated 10-year $5.6 trillion surplus, enacted the largest tax cuts in history, kept control of the House, captured control of the Senate, and won reelection. The lesson is clear: There is no short-term political cost to fiscal excess.

And over the long term? Look for deep cuts in that relatively small part of the budget devoted to human needs -- and deficits for as far as the eye can see.

The e-mail address for Joe Feuerherd is jfeuerherd@natcath.org

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