Budget director asks return to fiscal discipline

One month to the day since terrorists crashed hijacked planes into the World Trade Center, the Pentagon and the Pennsylvania countryside--prompting the nation to launch expensive efforts to aid the victims, to fight terrorism and to revive the sagging economy--Office of Management and Budget Director Mitch Daniels called Thursday for a return to some semblance of fiscal discipline.

Speaking to the moderate Republican Main Street Partnership, Daniels lamented the demise of the once politically inviolate Social Security lockbox in saying "more than the trade towers were demolished that morning - that compact [to devote the Social Security surplus to debt reduction] went down with it."

Daniels noted executive branch agencies have forwarded to OMB "over $120 billion" in recommendations for how to spend the $40 billion emergency supplemental Congress enacted last month to respond to the terrorist attacks.

To date, the administration has allocated $7.1 billion of the first $20 billion of the supplemental, and Daniels said OMB would send its request for the second $20 billion to Congress "real soon," but not today.

In the post-Sept. 11 budget environment, Daniels said it is "essential that we all sober up here, get our bearings and get some rules of the new road."

The first rule he offered was that emergency spending only should be for true emergencies. He also said that the stimulus package Congress is putting together should be balanced between spending and tax cuts--while noting that much of the spending "already has been enacted" in the supplemental and the $15 billion airline bailout--as well as be industry neutral and focused on short-term impacts.

Daniels particularly mentioned President Bush's proposals to accelerate the marginal rate cuts in the $1.35 trillion tax cut approved in the spring, accelerate depreciation changes for businesses, and offer a payroll tax rebate to people who missed out on the income tax rebate.

In the long run, Daniels stressed the need to maintain fiscal restraint. Daniels said the fiscal 2003 budget the administration is currently preparing "will err on the side of action" in terms of fighting terrorism and defending the homeland--but that in exchange, "lesser priorities will need to give way to make sure we are doing those things."

As for the fiscal year that just ended and the one that just began, Daniels said preliminary OMB estimates show "well over a $100 billion surplus" for fiscal 2001, which he later amended to $120 billion, and "at least a high digit surplus" for fiscal 2002.