House Budget chairman warns of possible spending cuts

House Budget Committee Chairman Jim Nussle, R-Iowa, warned Tuesday that if budget forecasts continue to worsen, Congress might have to take drastic steps--including trimming federal spending--to preserve surpluses for debt reduction. Nussle issued the warnings as the end of the fiscal year approached and expectations rose that the Congressional Budget Office (CBO) would deliver more bad news when it sends its midsession economic review to Congress later this month. "Spending may have to be curtailed" after CBO releases the midsession review, Nussle said. "If we want to pay off more debt, we need to reduce spending." At the top of his list--which Nussle said he had begun to draft--is a "sequestration" of discretionary spending for the current fiscal year, which ends Sept. 30. Sequestration is a mechanism to force reductions in spending by uniform percentages, with certain exceptions allowed under budget law. "We are working on the details. It may need legislation," Nussle said in an interview. One focus of the cuts, he said, could be the traditional "use- it-or-lose-it" mentality of federal agencies that try to spend their excess funds at the end of the fiscal year to preserve their budget baseline. These spending cuts would be separate from possible fiscal 2002 budget changes that could result from the updated CBO estimates, Nussle added. But he acknowledged the possible impact on spending decisions this fall in a variety of areas, including agriculture, education, defense and routine appropriations. Nussle would not say whether he would agree to increase the fiscal 2002 Defense spending allocation to accommodate an extra $18.4 billion sought by the administration. He said he must first see midsession review numbers to judge the impact of such an increase on Medicare trust-fund surpluses. The fiscal 2002 budget resolution gives the House and Senate Budget chairmen the authority to lift the spending cap on defense to accommodate the administration's fiscal 2002 Defense amendment--but only if that spending would not reduce the on-budget surplus below the surplus in the Medicare trust fund. Meanwhile, budget matters were also at the top of the agenda at Tuesday's Senate Republican Conference policy luncheon, where President Bush appeared. Bush gave senators a pep talk about their accomplishments heading into the August recess and urged them to maintain fiscal discipline. Meeting briefly with reporters after the lunch, Bush touted the GOP's fiscal 2002 budget plan and pledged to work with Congress to enforce it. "I intend to work with them to make sure we spend within the limits of the budget," Bush said. Senate Budget ranking member Pete Domenici, R-N.M., also spoke at the policy luncheon, to counter an aggressive Democratic campaign to highlight negative effects of the $1.3 billion Bush tax cut. "Democrats are bound and determined to politicize the fact that the surplus is less than we expected," Domenici said. Senate Budget Chairman Kent Conrad, D-N.D., rejected arguments that Democrats are trying to politicize the numbers. "I think I will just let history make the judgment who is politicizing what," Conrad said. Conrad said that despite his support for higher defense spending, he would not raise the fiscal 2002 Defense spending allocation to make room for the administration's $18.4 billion increase if it were not offset. If the increase could only be paid for using the Medicare trust-fund surplus, Conrad said the budget resolution precludes him from raising the allocation unless the increase is offset. If 60 senators voted to waive the budget rules, the increase could go forward anyway. But Conrad said he would not join those who might vote to waive the budget.