Government Executive - Authors - Stan Collender

Adventures in surplus land

Stan Collender — Thu, 01 Mar 2001 00:00:00 -0500

After years of trying to get rid of the federal deficit, lawmakers are at a loss for how to plan for the latest trend-surpluses. his will be the fourth consecutive year the federal budget will have a surplus. This simple statement is remarkable considering that only nine years ago, the deficit was at a record high of $290 billion and was projected to keep climbing. The last time the U.S. budget showed four consecutive surpluses was in the late 1920s, and only eight surpluses have been on the books since 1930.

Even more impressive is that these surpluses, which were so hard to achieve through most of the late 20th century, are now projected to be the norm through the early part of the 21st century. Indeed, the Office of Management and Budget and the Congressional Budget Office are projecting a surplus for at least the next 10 years.

No one in Washington, on Wall Street or in academia predicted such a feat. Just a few years ago, had anyone predicted 13 consecutive surpluses, they would have been dismissed as being hopelessly out of touch with fiscal reality. Now, the question is how much longer the streak will last. Deficits were thoroughly embedded and no one expected the situation to turn around so rapidly and completely. That is why dealing with surpluses has created such confusion and upheaval in Washington.

Who Said It Would Be Easy?

The politics of the budget surplus are as difficult as the politics of the deficit. Some would expect Congress and the White House to start the annual budget debate by joining hands and singing "Kumbaya," yet managers still are facing tough questions about funding for their programs. In fact, the challenge for federal executives is far greater now than it was before. Political, procedural and economic rules of past budget debates no longer apply. The surplus has set a different scene for the budget debates in Washington than anyone ever anticipated.

Fiscal Wishes
The most surprising and difficult question that now has to be answered is what to do with the surplus.

With so few surpluses to encourage them, economists have done little theoretical work to guide policy-makers. Furthermore, the work that has been done hasn't been taken seriously. Deficits were so pervasive, seemingly omnipresent and so apparently resistant to even the toughest measures that planning for annual surpluses made little sense. If the question was discussed at all, it happened over wine and cheese in some graduate school professor's office rather than in a House or Senate office building.

Surpluses appeared far more quickly than anticipated, compounding the problem of what to do with them. The 1997 budget agreement projected that the budget would be balanced in five years-by the end of fiscal 2002. Had that happened, Wall Street, academics, voters and politicians would have had time to discuss the surplus and arrive at a consensus. But the deficit turned into a surplus in 1998, five years ahead of schedule, leaving no time for such a discussion.

Under old budget politics, House and Senate members knew that no matter what else was happening, the budget agreement had to project a shrinking deficit. "There is no similar commonly accepted outcome when it comes to the surplus," says former House Budget Committee Chief of Staff Rick May. Now a lobbyist with Davidson and Co. in Washington, May says members of Congress are "very uncertain how to proceed, and that makes the outcome of the budget debate much harder to predict."

Representatives and senators seem to be coalescing around five options for what to do with the surplus:

Spend more overall.
Spend more on just one program or area.
Spend less.
Tax less.
Pay down the national debt. A sixth option-do nothing with the surplus until we figure out what is needed to fix Social Security-is also discussed from time to time.

Does Size Matter?

The main economic issue is whether a bigger surplus is always better. Economists have wildly divergent views on the subject. Many believe the best policy in the current economic environment in Washington is to pay off publicly held debt faster, especially if that leads to lower interest rates.

Others say using the surplus for a tax cut or for increased spending on investment-like programs, such as education or transportation, would be a far better way to guarantee long-term economic growth.

Considerable debate also has emerged over whether changes in fiscal policy, such as higher or lower surpluses, should be used to fine-tune the economy when the Federal Reserve can alter interest rates more easily and with a faster impact.

The bottom line is no one is quite sure where the debate should end up. "Everyone always knew that the final budget deal had to show the deficit being lower," May says. "That eliminated a number of options and gave us the ability to tell some people and groups that they could not have what they wanted." But with a surplus, the debate begins with no agreement about the outcome and "people are far less willing to take no for an answer," May says.

While this issue may seem to be mostly academic, it has some practical implications for federal managers.

Until some agreement about what to do with the surplus is commonly accepted, the annual budget debate in Washington will take even longer than the lengthy deficit reduction debates of the past. Before decisions about specific programs can be finalized, Congress and the White House have to agree on how much of the surplus, if any, is available.

The lack of a consensus about the surplus, the narrow majorities in the House and Senate, and the unwillingness of members to walk away from the budget debate empty-handed will make passing a congressional budget resolution and appropriations, tax and other budget-related legislation difficult and time-consuming.

As a result, federal agencies are far less likely to get their budgets approved by the start of the fiscal year.

What Budget Process?

The tremendous uncertainty about what to do with the surplus is exacerbated by a federal budget process that was not designed to deal with the issue.

"Congress does not really have a budget process . . . it has a deficit reduction process," says Tom Kahn, Democratic staff director of the House Budget Committee. Since at least 1985, when the procedures of the Balanced Budget and Emergency Deficit Control Act (known as Gramm-Rudman-Hollings) were put in place, the primary purpose of the congressional budget process has been to reduce the deficit. Gramm-Rudman-Hollings was followed by two other deficit reduction procedures-the 1987 Balanced Budget and Emergency Deficit Control Reaffirmation Act and the 1990 Budget Enforcement Act. The 1997 budget agreement extended the Budget Enforcement Act restrictions and limits through the end of fiscal 2002.

These laws were intended to guide congressional and administration budget decisions toward one end-reducing the deficit. Only extraordinary circumstances, such as war or recession, could interfere with that goal. What happens when the primary problem the budget process was designed to solve no longer exists? As evident in the past few years, the rules no longer provide any meaningful guidance to lawmakers and the process breaks down as Congress and the White House feel free to ignore procedures they believe are no longer appropriate.

The current budget process still has limits-or caps-on the amount that can be appropriated. The caps were revised in 1997 to cut spending and eliminate the deficit by the end of fiscal 2002. But with the surplus projected to exceed $250 billion in fiscal 2001, limiting spending has become unpopular. Last year, Congress ultimately approved close to $100 billion more than the law allowed.

The "pay as you go" rules, which limit tax cuts or entitlement increases, also have gone by the wayside.

PAYGO, as the rules are called, prohibits the surplus from being used as an offset to tax cuts and entitlement increases. However, last year's increases in Medicare were paid for by reducing the projected surplus. And all current talk about paying for proposed tax cuts revolves around reducing the surplus.

The lack of rules means many options are available to Congress and the White House as the debate unfolds, which is a problem for federal managers. Far more big-picture questions have to be answered before the coming year's appropriations can be passed.

The negotiations leading to these big decisions would be far from easy under any circumstances. But the economic and political environment of great uncertainty about what to do with a surplus, and no clear majority willing to solve that problem, could make the process downright chaotic.

How Bad Could It Be?

Last year offered a good example of just how messy and confusing the budget debate can become in the midst of a surplus.

Congress passed its budget resolution by the statutory deadline, but funding decisions were changed later in the year, as an additional $35 billion or so was added for different programs.

Some appropriations were adopted early in the year. But those bills never seemed final, even after the President had signed them. Supporters of these agencies saw additional money being made available and wanted some for their programs.

A record 21 continuing resolutions were needed before final funding decisions for all the agencies were enacted.

Current budget rules technically remain in effect for the fiscal 2002 debate, but the decision to ignore them last year essentially eliminates them even as a guide, let alone an actual limit on what Congress might do this year.

When Will It End?

All of the factors that have led to the surplus culture in Washington seem likely to remain in place this year and perhaps for many years to come. In fact, the budget turmoil of the past few years is likely to get worse before it gets better because the most important limits under the 1990 Budget Enforcement Act will expire after fiscal 2002. With no consensus on what to do with the surplus, few expect Congress and the White House to agree on a process that limits their options.

For federal managers, this means each year's budget debate will be quite an adventure.

Stan Collender is senior vice president and managing director of the Federal Budget Consulting Group at Fleishman-Hillard Inc. He is also author of The Guide to the Federal Budget (Century Foundation, 1999) and writes the "Budget Battles" column for NationalJournal.com and GovExec.com. ]]>

Budget Battles: The Dark Ages Of The Federal Budget

Stan Collender — Wed, 23 Aug 2000 00:00:00 -0400

scollender@nationaljournal.com

The Dark Ages were a period in history when chaos replaced order, when the more or less general agreement about what should happen was replaced by tremendous uncertainty about what lay ahead and who would lead, when the rule of law was replaced by the exercise of power.

In the aftermath of all that has happened this year (or in many cases failed to happen), it is time for us to admit that the federal budget debate has entered its own Dark Ages.

As "Budget Battles" noted a few weeks ago, the federal budget process for all intents and purposes is already dead and forgotten. The Budget Enforcement Act, which is legally required to be followed, is being replaced almost daily by ad hoc procedures implemented by those with the most votes-that is, by raw exercises of power. The previous general agreement on what should happen and how is no longer enforced, and it probably cannot be.

More important than the collapse of the budget process, however, is the fact that the underlying assumption of the federal budget debate that has guided most of the decisions of the past generation-that the deficit should be eliminated-is now no longer applicable. The question of what to do with the surplus, which should be the primary budget issue being discussed, apparently has become a taboo subject for decision makers and thought leaders.

This is all the more chaotic because few of the previous leaders of the intellectual and even political aspects of the federal budget debate seem to be seriously engaged in raising the issues that need to be settled. For example:

The Republican chairman of the House Budget Committee and ranking Democrat on the Senate Budget Committee are not running for re-election and are no longer playing a major role in the debate. No one in either chamber has replaced them as the budget world's heir apparent.

The director of the Office of Management and Budget is part of a presidential administration that will be out of office in five months and does not have to submit another budget to Congress. His focus is actually even shorter-getting through the next six weeks, when Congress is scheduled to adjourn for the year.

The Congressional Budget Office has been quieter lately than it has been in the past as it continues to work hard to stay out of the limelight.

The Federal Reserve, which has often played a very important role in the federal budget debate by setting the stage for what should happen and providing critical input on the economy, has become an almost nonparticipant in the fiscal policy debate-even though the decisions that may be made could be the opposite of what Alan Greenspan & Co. believe should happen.

Wall Street, which has been an important influence on federal budget decisions, is totally AWOL. There are some strong indications that the market cannot decide between its desire for reduced federal borrowing, which would make existing bonds more valuable, and smaller surpluses, which would require the federal government to borrow more and, therefore, provide a larger supply of bonds for traders to sell. There are also indications that Wall Streeters are conflicted between the personal tax cuts they think they would receive if the Republicans win this fall and the faster reduction in the federal debt the Democrats are offering.

The economics profession is nowhere to be found. The precise group that should be providing the intellectual leadership about the new realities of the federal budget debate, about the role of federal budget decisions when (1) there is a surplus and (2) Washington apparently does not have to do anything to keep the economic good times rolling, seems to have gone on an extended sabbatical. Where is the current day equivalent of supply-side or Keynesian economics that we can debate?

On top of all of this, the vast majority of this year's political campaigns are avoiding "the budget" as an issue. In one sense this is very strange: Both sides should want to take credit for what is genuinely one of the big Washington successes stories of the past few years. On the other hand, claiming credit could lead to a follow-up question about what should be done next-and no one seems ready to answer that yet.

Question of The Week

Previous Question. Two weeks ago "Budget Battles" readers were asked to name the federal department that the Office of Management and Budget was a part of before it became an independent federal agency. The answer is the Treasury Department. The Bureau of the Budget, as it was first known, was created in 1921, was transferred to the Executive Office of the President in 1939, and became OMB in 1970. The winner of the "I Won A Budget Battle" T-shirt, who was selected at random from the very large number of correct respondents, is Virginia McMurtry, who works at the Congressional Research Service of the Library of Congress.

This Week's Question. I heard what you were saying when you read the second bullet above: "What do you mean the Clinton administration does not have to submit a fiscal 2002 budget?" It's true. The question for next week: Why not? Get it right and you will win your very own "I Won A Budget Battle" T-shirt to wear while playing in your first touch football game of the season. Send your responses to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, Aug. 26, 2000. If there is more than one correct response the winner will be selected at random from all of the correct entries.

Who Will You Nominate For The Budget Person Of The Year?

What person or organization has had the most positive impact on this year's budget debate, and so should receive the coveted "Black Ink Award" from NationalJournal.com and "Budget Battles"? You get to choose. As soon as Congress adjourns for the year, readers will be asked to nominate their choice. In December they will be asked to vote for one of the top five nominees. All nominations and voting will be done online. More details will follow.

]]>

Budget Battles: Convention-al wisdom

Stan Collender — Wed, 09 Aug 2000 00:00:00 -0400

scollender@nationaljournal.com

With the Republican convention so choreographed, the fact that the federal budget was barely mentioned must be taken as an indication that it happened-or rather did not happen-by design.

Right now, the debate on the federal budget is at an absolute crossroads, where the economics, politics and processes of the past no longer match the fiscal decisions that have to be made. For the Republicans to choose not to use their national forum to engage in the debate was a huge missed opportunity.

It was the clearest sign yet that the 2000 presidential campaign will provide few, or perhaps no, real indications of the spending vs. taxing vs. debt repayment debate that has to take place over the next few years.

It will provide no guidance to policymakers on the political popularity of federal budget policies that could lead to lower interest rates compared to policies that could put pressure on them to be raised.

And it will do nothing to start preparing voters for the new and almost certainly decreased role that Congress and the White House will be playing in future national economic policy decisions, given the increasing ability of the Federal Reserve and financial markets to move quickly while Washington is usually stuck in fiscal molasses.

Of course, this is completely in keeping with the conventional wisdom that nothing positive would come from the 2000 election as far as the federal budget is concerned.

In fact, the conventional wisdom now looks somewhat timid. While "the budget" was hardly mentioned at the Republican convention, the budget issues that have so hamstrung previous debates-tax cuts, Pentagon increases, Social Security and Medicare-were discussed with the same level of sanctimony that was responsible for most of the stalemates of the past decade.

The failure of the budget to be much of an issue at the convention is also not surprising because, whether Republicans are willing to acknowledge it or not, the budget is one of the biggest success stories of the Clinton years (Budget Battles, May 30, 2000). The deficit will have fallen or surplus grown every year during the Clinton administration, the first time that will have happened during any presidency in U.S. history. It will appear to be even more of an accomplishment when compared to the record of the previous President, who just happens to be the father of this year's Republican nominee. (George Bush the elder presided over the largest deficit in U.S. history.)

This is not to say that the Democratic convention will be any less mired in the budget past, or that it will lead to more significant advances in the budget debate than occurred last week in Philadelphia. Democrats will have to do what the Republicans did-appeal to a primary base of supporters that, given the very low interest in this year's campaign, must be energized to get to the polls in November.

This means that a discussion of new and emerging federal budget issues most likely is seen by the political operatives of both parties as appealing to a group of voters so far outside their respective bases-and so unlikely to vote-that engaging them is not worth the time or effort. Even worse, it might actually be detrimental if it ended up turning off the base of voters whose participation is considered to be critical to both candidates.

At best, this situation means that the federal budget debates that follow the 2000 election will be just as stymied by the new questions and issues that must be answered as the past few years' debates have been. When the deficit unexpectedly changed into a surplus, it created a whole new world. But for now, at least, federal budget politics and policies are likely to be as conventional as ever.

Question of The Week

Previous Question. Two weeks ago "Budget Battles" readers were asked to test their culinary prowess by coming up with an entrée featuring a federal budget theme. The "I Won A Budget Battle" T-shirt goes to Susan Friedman of the American Osteopathic Association for suggesting a horseradish souffle-a puffed-up dish with a bitter aftertaste.

This Week's Question. Here's one for the budget history buffs who want to win their own "I Won A Budget battle" T-shirt. The Office of Management and Budget was not always an independent federal agency; it used to be part of another department. The question is, which one? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, Aug. 12. Please include your address so we can mail you the shirt if you win. If there is more than one correct response, the winner will be selected at random from all of the correct responses.

Who Is The Budget Person Of The Year?

What person or organization has had the most positive impact on this year's budget debate, and so should receive the coveted "Black Ink Award"? You get to choose. As soon as Congress adjourns for the year, readers will be asked to nominate their choice. In December they will be asked to vote for one of the top five nominees. All nominations and voting will be done online. More details will follow.

]]>

Budget Battles: Bury the budget process

Stan Collender — Wed, 26 Jul 2000 00:00:00 -0400

scollender@nationaljournal.com

Mark calendar year 2000 as the official death of the current congressional budget process. With the extraordinary liberties Congress is now routinely taking with virtually all of the process's statutory requirements, it is clear that the only thing left to do is give it a proper burial.

Consider the following: The House and Senate are in the process of passing a series of tax cuts that technically are still covered by the pay-as-you-go rules. This means that the projected reduction from the revenue baseline these bills would cause should have to be offset with other legislation that either cuts entitlement spending or increases receipts. But no one on Capitol Hill is talking about that. Rather, they are planning no legislated offset at all and instead will just lower the estimated surplus, which is prohibited by the Budget Enforcement Act.

Congress is also about to disregard the much higher limits on appropriations it set for itself in the fiscal 2001 budget resolution agreed to in April. The resolution, which required tricky negotiations to win majority support, assumed that discretionary spending would be $60 billion above the existing caps. Less than four months later, these higher levels are not enough to satisfy members of either house and so are either about to be ignored or changed again.

In reporting out many of the fiscal 2001 spending bills, the House and Senate Appropriations Committees have been complying with their allocations-the mechanism the process imposes to ensure that the budget resolution will be upheld-by assuming reductions that they themselves expect will not be sustained. In some cases the relevant appropriations subcommittee has announced in advance that it does not support the changes included in its bill and expects that it will be changed later.

Neither the House nor Senate Budget Committees, who up to now have been the defenders and protectors of the congressional budget process, have bothered to say a word in opposition while all of this has been going on. That might be because they have been told by the leadership of their respective houses not to make waves. It might be because they know that trying to force their colleagues to live up to the process's requirements would be futile. It also could be because budget committee members realize that trying to force the budget process to be followed could be personally damaging to their careers as their colleagues consider retribution for what surely would be more difficult votes than they want to take.

Regardless of the reason, however, no one-from the senior-most members of the House and Senate leadership to the junior-most members of the rank and file-is standing up for the budget process in any way that is meaningful. That has made it far more politically acceptable for Congress to run with impunity around and through what used to be a process that most everyone on Capitol Hill felt had to be made to work.

The fact that Congress met the April 15 deadline this year for adopting the budget resolution is not an indication that it considers the budget process to be a high priority. A resolution like this one, that is being routinely ignored or changed or was initially supported under the assumption that it would be changed, cannot be taken as an indication that the process is alive and well.

The same is true of the spending caps. The fact that Congress may go through the motions of amending the Budget Enforcement Act to raise the limits rather than ignoring them cannot in any way be taken as an indication that the budget process has wide or deep support. To the contrary, limits and procedures like these that are easily and frequently changed mean that the limits are not taken seriously, and that Congress gives the process little respect.

It also means that the budget process is not significant to the outcome of the spending, taxing and debt reduction decisions that are now happening in Washington. The congressional budget process has become little more than a ghost of what it once was. That may be the best indication of all that it is already dead.

Question of the Week

Previous Question. What does Congress do when the Office of Management and Budget and Congressional Budget Office come up with different estimates of the surplus? The answer is nothing. Congress is required to use CBO numbers and the administration is required to use OMB numbers. This means that Congress may pass legislation and adopt a budget under one set of assumptions but then find that the White House thinks it will cost far more or less or that the surplus will be very different from what it was assuming when the OMB estimates are used. Joe Luchok of the Health Insurance Association of America not only knew the correct answer, but his response was selected at random from all of the correct responses. He wins an "I Won A Budget Battle" T-shirt just in time for the dog days of summer.

This Week's Question. Last February, "Budget Battles" readers were asked to suggest the ingredients for a budget sandwich. This week's question again tests your budget culinary skills. The question: If you were asked to prepare an entrée appropriate for this year's budget debate, what would it be? For example, how about a heaping serving of pork that gets bigger the more it is cooked? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, July 29. Please include your address so we can mail you your shirt if you win. If there is more than one correct response, the winner will be selected at random from all of the correct entries.

]]>

Budget Battles: Time's running out

Stan Collender — Wed, 19 Jul 2000 00:00:00 -0400

scollender@nationaljournal.com

Forget about any revised surplus estimates, updated economic forecasts, or new short- or long-term projections you see or hear about in the next few days. The number that really matters at this point in the budget debate is that there are only 18 potential legislative days left before the start of fiscal 2001. The actual number of potential legislative days left this year before the start of the next fiscal year is somewhere between 10.5 and 18.

And that may overstate the amount of time that is actually available to do legislative work. Two of those potential legislative days are Mondays before primaries in September, and Congress typically does not take votes on such days so that representatives and senators running for re-election can be back home campaigning. These two primaries may also stop Congress from taking votes until late the following day so that members have time to get back to Washington and the two parties are at full strength. This will be especially important in a year like this when narrow majorities in both houses will mean that every vote is important.

Five other potential legislative days are other Mondays and Fridays. Although Congress typically works at the beginning and end of the week in September, in election years like this one (when control of at least the House seems to be up for grabs), there will clearly be some who will see leaving Washington early to campaign as being more important than staying around to vote. Given the narrow majorities in both houses, a handful of defections late in the week could cause the leadership to abandon any plans to continue working on legislation.

Finally, what appears to be the last full day of work before the start of fiscal 2001 -September 28- may not be. Rosh Hashana starts on the 29th and congressional leaders may have to stop votes early in the afternoon the day before so that Jewish members of Congress can return home.

Therefore, the actual number of potential days left this year before the start of the next fiscal year is somewhere between 10.5 and 18.

This means the following:

As has been expected since the beginning of the year, the White House again holds most of the cards in what is left of the fiscal 2001 budget debate. President Clinton does not have to campaign for re-election this fall and so will be more than willing to keep Congress in session through October to work on spending and taxing legislation, especially if that means that Republicans will not be able to campaign against their Democratic challengers.
A continuing resolution is not just likely, it is virtually guaranteed. Only one of the 13 fiscal 2001 appropriations has been enacted so far and there is nowhere near enough time to complete the rest.
The combination of the two realities above means that presidential vetoes of fiscal 2001 appropriations will be much more problematic for Congress than the leadership currently is saying. Even if the administration eventually goes along with what Congress wants on individual bills, vetoes will put more overall pressure on the Republican majority because of the amount of additional time that will be needed to settle matters for the year.
More than one continuing resolution should be expected. The White House will have maximum leverage if Congress has to pass a series of short-term CRs through October rather than one long one. A series of CRs will also make it look like Washington is even more chaotic than usual and that will hurt Republican incumbents far more than Democratic challengers. (There are Democratic incumbents too, but being in the minority offers political cover.)
The White House is likely to get tougher this year than it has been in previous budget negotiations. Presenting Congress with demands that cannot be sold to the rank and file could make a partial government shutdown possible. That would be extremely damaging for Republicans who (1) do not want to remind voters about the two shutdowns in 1995-1996; (2) want to avoid the "do nothing" label; and (3) want to make a distinction between the current and past leadership.
The fiscal 2001 surplus will be lower than anyone is currently admitting. If history is any guide, negotiations with the White House will lead to increased demand from congressional Republicans for more spending for their favorite programs to go along with what the administration is requesting.
There is no time for budget process reform this year. Even if there were a consensus on what to do-and there definitely is not-the time needed to debate and pass a budget resolution would take too much away from everything else that has to get done.
Tax cuts are highly unlikely to be enacted this year. Not only does there not appear to be enough votes to override a veto, but there will be very little time left when Congress returns from its August-Labor Day recess even to try. There will be a maximum of 15 legislative days in September, and every one of those will have to be devoted to appropriations. It should not come as a surprise, therefore, if Republican leaders decide that they will be better off politically to simply wait until next year.

The most interesting aspect of all of this is not simply that it was predictable-it's that it was actually predicted. As early as the end of last year's debate, political and budget analysts were saying that the legislative timetable in this election year greatly favored the White House and Democrats, and that the best thing Republicans could do would be to shorten their agenda and get things done quickly. But while the GOP leadership concurred, it was unable to get its members to comply-so the majority now finds itself in the very difficult bind that many anticipated. And at this point, it is too late to do much, if anything about it.

Question of the Week

Previous Question. "Budget Battles" readers are a sharp bunch, at least some of the time. The vast majority of readers who responded to last week's question knew that they were being asked a trick question. How many votes does it take to stop a filibuster in the Senate on a reconciliation bill? The answer is that a reconciliation bill cannot be filibustered because debate is limited to 20 hours. There are two winners of the much sought-after "I Won A Budget Battle" T-shirt. Congratulations to Barry Zulauf of the Drug Enforcement Administration and Kerry Weems of the Department of Health and Human Services. Both winners were selected at random from the large number of correct responses.

This Week's Question. The Congressional Budget Office was expected to release its economic and budget outlook Tuesday. Unless something very strange happens, its surplus estimates for fiscal 2001-2010 will be different, perhaps even very different, from those projected in June by the Office of Management and Budget in its mid-session review.The question: What is Congress required to do when CBO and OMB have different forecasts? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, July 22. Please include your address so we can mail you your shirt if you win. If there is more than one correct response, the winner will be selected at random from all of the correct entries.

Who Will Be The Budget Person Of The Year?

"Budget Battles" readers will soon be asked to nominate and vote for the person or organization who had the most positive impact on this year's budget debate with all nominations and votes happening online. Details to follow.

]]>

Budget Battles: Lessons worth learning

Stan Collender — Wed, 12 Jul 2000 00:00:00 -0400

scollender@nationaljournal.com

Here is another heaping serving of tidbit-like items to get your budget juices flowing after a week of fiscal R&R during the Independence Day holiday.

Redefine the "Surplus," Again?

The midsession review released by the Office of Management and Budget several weeks ago may have been the beginning of another attempt to redefine the way the federal surplus is calculated. Until last year, official Washington said that the surplus was the difference between total outlays and total revenues. Last year's debate changed things, as the surplus talked about most often by federal policy makers became the amount that federal revenues exceeded spending not including Social Security.

The midsession review started talk about a concept that has seldom, if ever, been discussed before in even theoretical terms-that the surplus is the amount by which federal receipts exceed spending excluding Social Security and Medicare. Immediately after the administration released its updated numbers, congressional Democrats pointed proudly to the fact that the surplus would be $39 billion in fiscal 2000 excluding both of these programs and that this was the first time since Medicare was established that there had been a surplus under this definition.

Congressional Republicans have not yet informally adopted this new concept, which is hardly surprising given that it would greatly reduce the amount available for anything other than Social Security and Medicare, such as tax cuts. But if the process by which last year's redefinition came to be budget gospel is any indication, there should be little doubt that the White House will succeed in making this the new standard if it chooses to do so.

The Lessons of Countercyclical Revenue Sharing

A long time ago, in a fiscal galaxy far, far away, there was a program called "countercyclical revenue sharing" that provided funds to state and local governments across the country when an economic stimulus from Washington was thought to be needed. The key element of the program was that it was triggered only by certain economic events and so was not supposed to be a source of revenue that could be counted on every year.

The idea was to create a short-term boost by giving state and local governments additional funds that they would spend as they saw fit. They were always cautioned not to do things that assumed that the increases would be permanent. As a result, hiring additional full-time police or teachers who would stay on the payroll after the countercyclical funds had been suspended was considered to be the wrong thing to do, while one-time activities like buying police cars or textbooks made much better sense.

There are startling similarities between countercyclical revenue sharing funds and the current budget surpluses. Both were triggered by economic events. Both could provide a short-term boost. And most important, like countercycle revenue sharing funds, the surplus could easily disappear next year.

With that last similarity in mind, it makes little sense for Congress and the White House to be pushing for the budget surplus to be used for permanent tax cuts or spending increases when the funds could be anything but permanent. A far better choice would be for Washington to put in place a one-time tax rebate that applies only to this year, when the surplus is much more certain, than to bet the farm (and city and suburbs) that the surpluses will continue every year from now on.

An Inconvenient Budget Process

To say the least, it is interesting to watch Congress struggle with the current budget process. Although members have obviously decided that the current caps on appropriations should not be enforced and have all but abandoned the pay-as-you-go rules, this week they are planning to use the reconciliation procedures to consider a tax cut because it will make it easier to be debated and passed. This is close to budget anarchy: Existing procedures, rules, and prohibitions that get in the way are simply abandoned, while those that make it easier for things to happen are used in ways that were not anticipated when the rules, procedures and prohibitions were put in place.

What makes all of this even more anarchistic is that the changes are being made in an ad hoc way-nothing is being confirmed officially or formally. There has been no vote to abandon the caps and PAYGO rules, let alone a committee hearing about whether it would be a good idea.

When is Someone Going To Ask This Question?

One of the most important problems hampering the debate over what to do with the budget surplus is that many of the key questions have yet even to be asked, let alone answered. For example, policymakers should want to know at what point it no longer makes sense to use the surplus to pay down the debt. Is there some point at which additional debt reduction will not put as much downward pressure on interest rates as Federal Reserve Board Chairman Alan Greenspan says will happen currently? Or at what point will an additional dollar invested in education, research and development be more valuable than that same dollar being used to lower federal borrowing?

An even better question is whether there is any way information like this can be built into federal budget decision making.

Question of the Week

Previous Question. Two weeks ago, readers were asked to come up with an appropriate tag line or slogan that could be used by federal budget users, watchers, analysts or taxpayers. The answers were all over the board (and the political spectrum). There were many variations on "What's Up?" or "Whatzzz Up?" as well as a similar group of plays on the Nike line of "Just Do It." The winner of an "I Won A Budget Battle" T-Shirt, however, is David Smith, acting chief of the engineering development division at Pine Bluff Arsenal, for his entry that referred to the federal debt: "Pay it off, pay it ALL off!"

This Week's Question. As noted above, the reconciliation procedures are going to be used to expedite consideration of a tax bill in Congress. The question: How many votes does it take to override a filibuster of a reconciliation bill in the Senate? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, July 15, 2000. Please include the address to which you want the T-shirt sent if you win. If there is more than one correct response, the winner will be selected by random drawing from all of the correct entries.

Coming Soon: The Budget Person Of The Year

For the third consecutive year, Budget Battles will ask readers to nominate and vote for the budget person of the year, the individual or organization that has had the most positive impact on the federal budget debate. All nominating and voting will be done online. Details to follow in the weeks ahead.

]]>

Budget Battles: Just don't do it

Stan Collender — Wed, 28 Jun 2000 00:00:00 -0400

scollender@nationaljournal.com

An open letter to Congress, the White House, all presidential candidates, all House and Senate candidates and anyone else who might be interested:

Don't do it.

The Office of Management and Budget this week released its latest update showing that the federal budget surplus could be $75 billion or more higher in fiscal 2001-and perhaps as much as $1 trillion higher between 2001 and 2010-than had originally been estimated. This will create substantially increased pressure for either a big tax cut or spending increases.

Don't do it. Please resist all of the primal urges that have become so embedded in the U.S. political system.

Instead, listen to Federal Reserve Board Chairman Alan Greenspan, the person you prefer to venerate for the record-breaking economic growth of the past nine years rather than give any possible credit to your opponents. Greenspan has said consistently and unambiguously that the best thing than can be done with the surplus in the current economic environment is to reduce federal debt.

Greenspan's judgment has been so right up to now-and you have been so quick to make him into a cross between a deity, guru and icon-it would be foolish to reject his wisdom now.

Alternatively, listen to your current or soon-to-be constituents. Public opinion polls continue to show that the overwhelmingly preferred policy is to use the surplus to reduce federal debt. Voters are far more worried about Congress and the White House making a mistake by changing fiscal policy and messing up what they now have going for them than they are interested in a few extra dollars coming their way.

Or listen to the financial markets. Interest rates have been rising in recent months because of concerns about the U.S. economy overheating. Those concerns will grow if you enact a big tax cut or spending increase at the absolute wrong time and create even more buying power when it is not needed. More than two-thirds of Americans now live in homes they own, and so are exceedingly sensitive to interest rate increases. A definitive decision to use the higher-than-expected surplus to reduce debt will be a pleasant surprise to the bond market and the Federal Reserve, and that should create more downward pressure on rates than would otherwise be the case. Your homeowner constituents, and those who would like to own a home-essentially everyone-will love you for it.

(Note: A tax cut or spending increase might be more palatable if you were willing to cut spending or increase revenues to offset the net impact on the economy. But no one seems interested in making that tradeoff. To the contrary, everyone seems interested in cutting taxes and increasing spending without considering the bottom line.)

I know this will be hard for you. Not doing something is tough for elected officials, most of whom ran for office thinking there was a need for big changes. But please keep in mind that this is an exceptional time in U.S. history-the record growth, the continuing large surpluses and the underlying changes in the economy have combined to create a situation for which there is literally no parallel. We have no analogous political, historical, procedural or economic precedents to guide what, if anything, should be done. As a result, not doing "it," whatever that may be, is the far safer course at the moment.

Any worries you might have about becoming irrelevant as far as economic policy is concerned are completely unfounded. At some point, perhaps even soon, the overall situation will change and Washington will have to respond by using the budget tools at its disposal. In addition, at some point, again perhaps soon, a debate will take place and answers will be found to some of the questions the surplus is creating and that will allow policy changes like tax cuts and spending increases to be considered for more than just political purposes.

For example, even if the extraordinary economic growth continues, at this point we don't know whether it will always be better to reduce federal debt than to do something else with the surplus. If the debt were mostly or completely paid off, would surpluses still make sense? And at what point does an extra dollar of debt reduction not mean as much for the economy as that same dollar being invested in research, education, plant and equipment, etc.?

It should not surprise you if these questions are hard to answer right now. Frankly, until recently they could not even be asked with a straight face.

There will be plenty of opportunities and many reasons to cut taxes and increase spending in the future. But for now, the correct thing to do is to be grateful for the chance to both reduce publicly held federal debt and take credit for not doing something. Few of the federal elected officials who have come before you have had a similar opportunity.

Sincerely,

"Budget Battles"

Question Of The Week

Last Week's Question. The Office of Management and Budget is required by section 1106 of Title 31, USC, to submit the mid-session review "before" July 16 each year. Although in many years this has meant that the target date was July 15, this means that, as it seems will happen this year, OMB can send the report to Capitol Hill much earlier. The winner of the "I Won A Budget Battle" T-shirt, who was selected at random from the many correct responses, is Hazen Marshall, who is deputy chief of staff to Senate Assistant Majority Leader Don Nichols, R-Okla.

This Week's Question. An athletic shoe manufacturer tells its customers to "Just Do It," kids considering using drugs are told to "Just Say No," and a fast food company used to tell its customers "You Deserve A Break Today." The question: What tag line should be used for federal budget users/watchers/analysts or taxpayers? Send your response to scollender@nationaljournal.com, by 5 p.m. EDT on Saturday, July 1, and you could win an "I Won A Budget Battle" T-shirt of your very own. Please include the address to which you want the shirt sent if you win. If there is more than one correct response, the winner will be selected by random drawing.

Special Note To All Readers: If you want some help in answering the technical budget process questions that "Budget Battles" sometimes asks, you might want to get a copy of the updated version of "Compilation of Laws and Rules Relating to the Congressional Budget Process." Copies can be purchased from the U.S. Government Printing Office. The House Budget Committee document is Serial No. CP-4 (May 2000) and ISBN 0-16-060544-X.

]]>

Budget Battles: Campaign promises and budget dreams

Stan Collender — Wed, 21 Jun 2000 00:00:00 -0400

scollender@nationaljournal.com

There has been some increased federal budget activity on the presidential campaign trail in recent days. George W. Bush made a statement several weeks ago on a variety of aspects of the budget process while Al Gore made a nationally covered speech about his plans for the surplus. And both of the presumed nominees have talked about tax cuts lately.

Stump speeches aside, an incoming president usually has little ability to make big or rapid changes in the budget.

The most important thing to keep in mind about all this recent posturing-as well as that still to come-is simple: It probably does not matter.

Presidential campaigns happen months before anyone is sworn into office. By the time the president-elect takes the oath and starts to govern, the economic situation is often very different than the one that existed while he was running.

In this case both candidates are making statements about what they would do on the budget seven months before the inauguration. Very little is likely to be the same next January as it is today.

In addition, very few presidents are in a position to have an immediate impact on the budget-no matter what they say during the campaign or how earnestly they say it. The fiscal year is almost four months old by the time a new president moves into the White House. It is even older by the time an administration's machinery is in place to propose what should be done-most revisions to a previous president's budget submission are sent to Capitol Hill in March or April. And it is older still by the time the new Congress decides who will serve on which committees, the committees decide on their subcommittees, everyone figures out the agenda and the legislation making the changes gets enacted... that is, if it gets enacted at all.

This means that in the absence of some type of crisis that everyone acknowledges must be quickly addressed, or what is perceived to be a clear mandate that dare not be ignored, the incoming president usually has little ability to make big or rapid changes in the budget.

But there are also other reasons to look skeptically at the budget pronouncements of the presidential candidates.

First, their economic advisers will probably be different after the election. To the great consternation of most campaign workers, a president's senior policy advisers after the election are usually quite a different group from those who advised the candidate. The cabinet often consists of women and men who had little or no role in the campaign; the president needs to take their biases, contacts, experiences and expertise into account when dealing with the whole budget and the budgets of their agencies and departments. In addition, the Congress the new president has to deal with will be different from the one that existed during the campaign. Statements made now about how the new president would change the process to avoid slowdowns and shutdowns may no longer be relevant if the House or Senate changes hands or if the majority in either chamber changes substantially.

Similarly, stated preferences about which programs would be increased or how they would be changed that are made in the legislative vacuum of the campaign must be rethought, reworked or dropped completely before being offered to a real Congress that must pass judgment on them.

This last point is actually the most important reason that the current budget statements by Bush and Gore should be taken with a grain of salt. During the campaign, promises on the budget can be made without any real concern about whether they will actually be enacted. Each of the presumptive nominees can act like he will be king rather than president, and be able to impose his preferences by fiat rather than legislative compromise.

We know from the debates of the past few years that there is little or no consensus on what to do with the budget in Washington. We also know that narrow majorities in the House and Senate, having a surplus instead of a deficit, and the seemingly strong desire by voters to have Congress and the White House do nothing that might mess up the extraordinary economic situation currently enjoyed, have combined to essentially freeze budget policymaking in place.

None of this is expected to be very different after the election. With no obvious mandate for a change on the budget likely to be forthcoming from the voters, there is no reason to think that the next president will have the desire or ability to make big changes- regardless of what is said on the stump this summer.

Question Of The Week

Last Week's Question. "Budget Battles" readers were asked who makes the 302(b) allocations that are used to determine whether an appropriation bill is above or below the limits set in the budget resolution. The answer is the House and Senate Appropriations Committees, which determine the allocations for their respective house. In the words of two-time former winner Richard Kogan, this means "...the 302(b)s for each body need not initially match each other." Because of the large number of correct responses, two winners of an "I Won A Budget Battle" T-shirt were selected at random. They are: Douglas Wagner, press secretary to Rep. Jim Leach, R-Iowa, in his Cedar Rapids office, and Brad Hunt, an adjunct professor of history at Roosevelt University in Chicago.

This Week's Question. Here's your chance to win your own "I Won A Budget Battle" T-shirt to wear while watching Fourth of July fireworks. What is the deadline for the Office of Management and Budget to release its mid-session review of the budget? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, June 24. Please include the address to which you want the shirt sent if you win. If there is more than one correct response, the winner will be selected by random drawing.

]]>

Budget Battles: The Clinton legacy, part three

Stan Collender — Wed, 14 Jun 2000 00:00:00 -0400

scollender@nationaljournal.com

The past two "Budget Battles" have reviewed many of the quantifiable budget aspects of the Clinton years. But a bit more number crunching has to be done before judgments can be made as to who should get credit. The fact that only 30 percent of the improved budget outlook is the result of legislation is really not that surprising.

The key figure to remember is this: Only about 30 percent of the total deficit reduction/surplus increase that occurred between 1994 and 1999 (the six fiscal years starting with the first budget submitted to Congress by President Clinton that have been completed) can be attributed to legislative changes. Extending the same type of analysis to projections for the last two fiscal years of the Clinton administration shows the amount of deficit reduction/surplus increases attributed to legislation is getting smaller - to no more than 25 percent.

The remaining reductions in the deficit and increases in the surplus have occurred either because of the continued economic good times or because of what budget analysts call "technical" changes. Technical changes occur for many reasons, such as updates of previous estimates or better program administration. But the revised numbers do not result from enacted legislation, and therefore cannot be attributed to anyone.

It is safe to conclude that the extraordinary and unexpected improvement in the deficit outlook seen since 1994 should not primarily be attributed to efforts initiated by either the Clinton administration or Congress. The gains were far more fortuitous than planned and happened more because of the still growing economy, of changes in the way taxpayers earn their income, of fewer people applying for benefits for some programs, or because some costs turned out to be lower than originally anticipated.

For the sake of argument I will give the Clinton administration credit for the 1993 budget agreement, which passed without a single Republican vote, and give Congress credit for the 1995 budget agreement, which probably would not have occurred had it not been for the 1994 election results that produced Republican majorities.

It is important to keep in mind, however, that those two deals plus any other legislation enacted during the Clinton years still account for only about 30 percent of the total deficit reduction or surplus increase.

There are arguments about who should get credit for the better-than-expected economy and, therefore, who should get credit for the deficit reductions/surplus increases associated with it. The White House would have been blamed if the economy faltered, so symmetry alone indicates that the administration should get at least some of the praise. And former Treasury Secretary Robert Rubin certainly deserves credit for what many believe was a masterful job.

Then again, it might have been Wall Street's and the Federal Reserve Board's belief that a Clinton presidency combined with a Republican-controlled Congress meant few deficit increases would be enacted. That kept interest rates relatively low over the period and provided much of the fuel for the continued economic expansion that lowered the deficit so dramatically.

Or perhaps the Republican-controlled Congress deserves credit for making sure that the Clinton administration did not achieve much of what it wanted, creating the stalemate of which Wall Street and Alan Greenspan were so enamored. Then again, doesn't the Clinton administration deserve at least some credit for stopping Congress's budget excesses as well?

The fact that only 30 percent of the improved budget outlook is the result of legislation is really not that surprising. The biggest deficit reductions that were planned in 1997 were not intended to go into effect until fiscal 2001-2002, so none of those reductions has yet occurred. Nor, for that matter, will they.

The White House and Congress have now abandoned the increasingly tighter caps on appropriations agreed to in 1997 that would have produced the deficit reductions. Instead, legislation was enacted to greatly increase the spending on highways, mass transit and aviation. President Clinton and Congress are both pushing for increases for the Pentagon and education, among other things. And a few small revenue reductions, such as the elimination of the federal telephone excise tax, could be agreed to this year.

All of these lead to the conclusion that, in spite of the very positive change in the deficit/surplus outlook during the Clinton administration, budget historians may very well look back at an extraordinary missed opportunity to have done more. If the caps had been maintained and if the better-than-expected economy had not produced the big surpluses, then instead of the spending increases that emanated from both Congress and the White House, additional legislation that made permanent changes in federal spending and taxing might have been enacted. And the country's longer-term fiscal health might have been improved much more.

Question Of The Week

Last Week's Question. "Budget Battles" readers responded enthusiastically for the call for budget sound bites that an historian might use to describe the Clinton years. The most frequent suggestion was some variation on "Show me the money!" The "I Won A Budget Battle" T-shirt goes to Kim Love, who works in the Washington office of Rep. Debbie Stabenow, D-Mich., for "Hasta la vista, deficit!"

This Week's Question. Here is a question for the wonks and would-be wonks who want an "I Won A Budget Battle" T-shirt. The question: The House and Senate use the 302(b) allocations to determine whether an appropriation bill complies with the budget resolution. Who determines the 302(b) allocations for each appropriation bill? The winner will be selected by random drawing if there is more than one correct response. Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, June 17. Please include your address so that the shirt can be mailed to you if you win.

]]>

Budget Battles: The Clinton legacy, part two

Stan Collender — Wed, 07 Jun 2000 00:00:00 -0400

scollender@nationaljournal.com

This week's "Budget Battles" continues where last week's column left off by looking at the spending and revenue changes that have occurred during the Clinton administration.

This is not as easy as it seems. Although the numbers are certainly available, the question is to what does one compare them. And that puzzle prompts an entire set of analytical issues that must be dealt with before any conclusions can be reached.

The original plan was to compare the Clinton budget results to the results of the previous seven presidents, starting with the Kennedy administration. But because each of these presidencies lasted for different periods, simply looking at spending and revenue changes from the beginning to the end makes shorter administrations look better than Ronald Reagan's or Bill Clinton's, each of which lasted for two full terms.

The solution is to look at the average growth in spending and revenues per year of each administration. Although this masks big changes in any one year, it is the fairest way to compare the overall results of one presidency to another.

To make this even fairer, constant instead of nominal dollars should be used to eliminate any bias caused by inflation. In addition, recent changes in the budget presentation (a program that was made on-budget or off-budget, for example) need to be carried back to the previous years so that the results are as comparable as possible.

Average Annual Increases in Spending
(in billions of constant dollars)

Administration	Average Increase
Clinton	$17.5
Bush	$7.4
Reagan	$29.0
Carter	$31.2
Ford	$17.5
Nixon	$9.5
Johnson	$36.4
Kennedy	$9.0

On this basis, the table above shows that the Clinton administration will be decidedly in the middle of the pack and at the same place as one Republican fiscal conservative when it comes to average annual spending increases. In constant dollars, outlays look like they will increase by about $17.5 billion a year while Clinton is in the White House, the same rate as during Gerald Ford's administration. Three presidents (Reagan, Jimmy Carter and Lyndon Johnson) had spending increase each year by much more than Clinton. Three others (George Bush, Richard Nixon, and John F. Kennedy) saw spending increase by much less.

The picture is quite different when it comes to revenues. The average annual growth in revenues while Clinton is in the White House puts his administration at the very top of the list. Again using constant dollars, the table below shows that revenues look like they will grow by almost $66 billion a year during the Clinton administration. This is more than twice the growth rate that occurred in both the Reagan and Carter years. It is also 62 percent more than the next highest growth rate, which occurred while Johnson was in the White House.

Average Annual Increases in Revenues
(in billions of constant dollars)

Administration	Average Increase
Clinton	$65.9
Bush	$4.4
Reagan	$30.7
Carter	$30.7
Ford	$23.9
Nixon	$8.0
Johnson	$40.5
Kennedy	$11.7

As many "Budget Battles" readers pointed out in response to last week's column, numerical comparisons do not tell the whole story. In this case, for example, the extraordinary economic growth that has occurred during the past seven-plus years must be given credit for at least some of the limits on spending and increases in revenues that occurred. In fact, there have been few legislated tax increases during the Clinton era, so it is hard to say his administration raised taxes by this much. Similarly, the caps on discretionary spending enacted before the Clinton administration began that were generally complied with until last year must be at least part of the reason that spending did not grow that fast.

But that is the topic for next week: Giving Credit.

Question Of The Week

Last Week's Question. What should a summer blockbuster movie or novel be called? No one suggested "Red Ink Rising," so I guess it is safe to say that the federal deficit is clearly out of sight and out of mind for most budget watchers. As promised, there were two winners of the much sought-after "I Won A Budget battle" T-shirts. Robert Torres of the U.S. Office of Personnel Management wins for "Mission: Almost Impossible FY00," and Hayden Milberg, legislative director for Rep. Tom Latham, R-Iowa, wins for "Bill (Clinton) and Ted's (Stevens) Excellent Adventure."

This Week's Question. The official start of summer is only a few weeks away, so there's no better time to get an "I Won A Budget Battle" T-shirt of your own. And this week it is easy. In the spirit of the three Legacy columns, all you have to do is come up a sound bite that a historian might use to describe the Clinton years from a budget perspective. For those of you not familiar with sound bites, think "Senator, you're no John Kennedy," or "Read my lips, no new taxes," or "The only thing we have to fear is fear itself." Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, June 10. Please include your address so that we can send you your T-shirt if you win.

]]>

Budget Battles: The Clinton legacy, part one

Stan Collender — Wed, 31 May 2000 00:00:00 -0400

scollender@nationaljournal.com

Although there are still about eight months before the next president is inaugurated, it is a good time to start looking at how the Clinton era is likely to be evaluated by budget historians.

First, the most important fiscal aspect of the eight years during which Bill Clinton was president will be that it was the time the federal budget went from being perpetually in deficit to constantly in surplus. (For purposes of this series of columns, the Clinton era is defined as fiscal years 1994-2001 and is obviously based on a number of assumptions about the final results for fiscal 2000-2001.) While a surplus has now come to be expected, the fact that it happened not once but for five consecutive years (fiscal years 1998-2002) and is projected to keep on happening after Clinton leaves office makes it exceptionally noteworthy.

Second, no other White House in modern U.S. history will be able to claim as much black ink as the Clinton administration, including those that were considered to be fiscally conservative. The last time there were five consecutive budget surpluses was during fiscal years 1926-30 (Coolidge and Hoover), and the surpluses in those years were lower as a percent of GDP than those of the Clinton era.

Third, under current forecasts, the deficit will have fallen or surplus risen for each of the eight years of the Clinton presidency. Although the data from the 1800s is a bit sketchy, these eight years of continuous fiscal improvement appear to be unmatched in U.S. history.

Fourth, the Clinton budget era may be best remembered as the point at which the total budget surplus became irrelevant for policymakers and the "on-budget" surplus (the surplus not including Social Security) became the key concept.

Fifth, in large part because of the use of the on-budget surplus instead of the total surplus, and the assumption that took hold while Clinton was president that the annual total budget surplus had to be at least as large as the surplus in the Social Security trust fund, the amount of publicly held federal debt is likely to be reduced more during the eight years Clinton is in the White House than it was during any other previous administration.

Until recently, the publicly held federal debt was not big enough to reduce as much as seems likely to happen while Clinton is in office. On the other hand, the fact that budget politics during this time will have changed so much is by itself very significant, and potentially signals the start of a new era in federal budgeting.

Sixth, the federal budget process has taken a real beating during the Clinton administration. By the time this president leaves office, it will not be at all clear what Congress and the White House are supposed to be doing on the budget or how they are supposed to be doing it. In this respect, therefore, the Clinton budget era will be ending far worse than it began.

Ironically, much or most of this will be the result of the surpluses, which were so rare before the eight years of the Clinton administration that virtually no one planned for how to deal with them when they happened. The combination of the old deficit reduction process, the absolute lack of any political or economic experience, and deciding what to do with a budget surplus means that fiscal policymaking will approach chaos as the administration comes to an end.

Finally, there is also little doubt that budget politics have become far more difficult during the Clinton White House than they have ever been before. Although "dead-on-arrival" was used by Congress long before Clinton was elected to describe the president's budget, and continuing resolutions were hardly new before he took office, the level of acrimony between the legislative and executive branches on budget matters has never been any higher than it is as this administration comes to a close.

Next Week: Part 2: Spending and Revenues.

Question Of The Week

Last Week's Question. The question was: Who would you call to be your lifeline if you were on "Who Wants To Be A Millionaire" and you were asked a federal budget question? The responses were a veritable who's who of federal budget experts and, frankly, there was simply no way for "Budget Battles" to choose which of the recommendations would be the best. As a result, no "I Won A Budget Battle" T-shirt will be awarded this week but two winners will be selected next week.

For the record, in alphabetical order the people who were named by readers as potential budget lifelines (most more than once) were current CBO Deputy Director Barry Anderson, House Budget Committee Counsel Jim Bates, former House Budget Committee General Counsel Wendell Belew, former Congressional Budget Office Deputy Director Jim Blum, former Senate Budget Committee Counsel Bill Dauster, former House Speaker Newt Gingrich, R-Ga., House Budget Committee staffer Richard Kogan, Rep. David Minge D-Minn., Rep. Charles Stenholm, D-Texas, staffer Ed Lorenzen, former CBO Director Robert Reischauer and former Office of Management and Budget Director David Stockman.

This Week's Question. Here is your chance to become a mogul and win your very own "I Won A Budget Battle" T-shirt at the same time. This is the season when book publishers and movie studios bring out the big thrillers and action adventures that are either great beach reading or the perfect distraction when the hot weather drives people inside an air-conditioned theater. This week's question: If you were going to publish or produce the big federal budget blockbuster book or movie this summer, what would it be called? For example, how about "The Attack of the Killer Outlays" or "The Continuing Resolution That Wouldn't End"? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, June 3. Remember, two winners will be selected this week.

]]>

Budget Battles: Why budget reform died

Stan Collender — Wed, 24 May 2000 00:00:00 -0400

scollender@nationaljournal.com

Last week's failure by the House to change the budget process (H.R. 853) should not have been a surprise to anyone.

In retrospect, the shock was that the leadership and the bill's sponsors did not realize what little chance the legislation had of being adopted, and therefore did not pull it from the schedule before the embarrassing defeat.

The bill had a number of fatal flaws. Here's eight good reasons why the reform effort went nowhere.

The appropriations committee perceived it as a threat to its jurisdiction and power. Budget process reformers have known since the Congressional Budget Act (CBA) was debated more than a quarter-century ago that appropriators' support is critical to changing the budget process. That was why the CBA included a number of important accommodations to these committees in the first place, including preventing the budget committees from making any line-by-line decisions and making sure that the functions in the congressional budget resolution were not the same as the spending jurisdictions of the 13 appropriations subcommittees.
The Transportation and Infrastructure Committee opposed the bill. Chairman Bud Shuster, R-Pa., has proven himself to be very adept at getting around the budget process when it stood in his way, and his opposition by itself might have been enough to stop the bill. But when Shuster joined with James Oberstar, D-Minn., the committee's ranking Democrat, the bipartisan coalition provided all of the political cover other members needed to vote against the bill.
There are 136 representatives on the Appropriations and Transportation and Infrastructure committees - 74 of them Republicans. With only a five-seat majority in the House, these members' opposition was always going to be deadly.
While there is widespread dissatisfaction with the way the budget process is working, or not working, there is anything but a consensus as to how the budget process should be changed.
The revisions in H.R. 853 were only tactical changes. There was virtually nothing in the legislation that dealt with the larger issues of what the federal budget process should accomplish. For example, while there was a general agreement when the current process was enacted in 1990 that it should reduce the deficit, there is no similar agreement today now that the deficit has been replaced with surpluses. There has been no definitive debate on even the prime options, such as reducing federal debt, cutting taxes, increasing spending, preserving Social Security or cutting the size of government. Many representatives felt that dealing with the strictly procedural problems addressed in the bill would mean that the larger issues might not be dealt with at all.
There is a surplus instead of a deficit, and so there is not as much need to do anything. If, as has happened each of the past few years, the budget process fails to produce an agreement, there is still a surplus rather than a deficit and those that want the surplus to be used to reduce the federal debt get what they want. Those that want the surplus to be used to cut taxes or increase spending may not get what they want, but at least their opponents are stymied as well. In addition, debt reduction benefits both tax-cut and spending-increase supporters - although they do not get their first choice this year, the lower interest payments that result will mean that more money will be available in the future.
As much as everyone complains about it, in many ways the relative chaos of the existing budget process is serving the political needs of most members. The fact that the caps are no longer being enforced means that the power of the appropriations committees, which have often bristled under the restrictions imposed by the current process, has grown substantially. The reduction in the federal debt may be happening by default, but debt reduction is the fiscal policy supported by a majority of voters and the chairman of the Federal Reserve Board. And, as noted above, the current dysfunction at least stops others from political victories.
The bill was debated six months before an election that is already being bitterly contested, one in which control of the House is considered to be up for grabs. With that much at stake, any compromise that gives the other side even a symbolic victory is extremely unlikely. By itself, reason number eight would have made any legislation dealing with sensitive budget issues hard to pass. Add in reasons 1-7, and it is clear that H.R. 853 never had a chance.

Question Of The Week

Previous Question. This was a tough question; one that only a true congressional budget process aficionado was likely to know. The question asked readers to identify the only remaining official role for the budget committees now that the budget resolution conference report has been adopted. In most years the answer would be to manage the reconciliation process. When more than one committee receives reconciliation instructions in the budget resolution, they send their recommendations to their respective budget committees, which package all of the submissions into a single bill, report it to the full House and/or Senate, and manage the debate.

This year, however, only one committee in the House (Ways and Means) and one in the Senate (Finance) received reconciliation instructions. That means each committee reports its reconciliation bill directly to the House or Senate floor and manages the debate itself. The budget committees have no official role. The only thing left for the budget committees to do is file a few reports directed by the Congressional Budget Act - adjusted allocations and aggregates according to section 302 and monthly current level reports according to section 308.

Only two readers answered this week's question correctly and both will get an "I Won A Budget Battle" T-shirt for their efforts. Congratulations to previous winners Richard Kogan of the House Budget Committee and Ed Lorenzen from the Washington office of Rep. Charles Stenholm, D-Texas. Richard and Ed: You have to get out more often.

This Week's Question. Say you are in the hot seat opposite Regis on "Who Wants to Be A Millionaire" and you decide to use one of your lifelines to call someone to help you answer a question about the federal budget. Who would you call and why?

Send your response (along with the address to which you want the shirt sent if you win) to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, May 27, and you could win your very own "I Won A Budget Battle" T-shirt to wear at the first pool party of the season. (Please note, at the risk of everyone thinking that I am flattering myself and being even more egotistical than usual, suggesting me as your lifeline will not get you a T-shirt.) If there is more than one correct response, the winner will be selected at random from the correct entries.

]]>

Budget Battles: You say you want a resolution

Stan Collender — Wed, 17 May 2000 00:00:00 -0400

scollender@nationaljournal.com

Why did they pass the budget resolution anyway?

The Congressional Budget Office's latest report on federal finances, released last Friday, is more important than usual because of the unofficial rules being used to govern this year's budget debate.

In the past, a larger-than-expected surplus would have been of interest but of no real relevance because it was the caps on discretionary spending that determined the amount that could be spent on appropriations. The caps were written into law-the Budget Enforcement Act-and did not change whether the surplus or deficit was higher or lower than anticipated.

This year, however, it is the caps that are irrelevant. It is now the on-budget surplus that determines how much is available for spending increases . . . or tax cuts or debt reduction. As a result, last Friday's CBO report showing a higher on-budget surplus for fiscal 2000 than previously had been anticipated means that this year's budget debate is about as unsettled as it could be.

The $40 billion or more on-budget surplus that CBO now says will occur in fiscal 2000 is causing some in Congress to assume that it will occur again in fiscal 2001 and every year thereafter. This, in turn, has members and staff dreaming about what could be done with the additional imaginary revenues.

Some want it to be used for discretionary spending so that many of the knockdown fights with the White House that almost everyone is anticipating can be avoided.

Others see the additional $400 billion to $500 billion in aggregate on-budget surpluses that result from a simple extension of this year's good news 10 years into the future as the best reason yet to cut taxes.

And still others think that the higher-than-expected on-budget fiscal 2000 surplus should be used to pay down the federal debt. This is especially the case because using the on-budget surplus to pay down debt would be an overall reduction in federal borrowing rather than just a shift from debt held by the public to debt held by the Social Security trust fund.

The fact that the higher 2000 surplus has fired the fiscal imaginations of members of Congress is hardly surprising. What is surprising is how quickly the fiscal 2001 budget resolution conference report, which was adopted barely a month ago, seems to have been forgotten. Minutes after the CBO report was available, representatives and senators who voted for the resolution were calling for significant changes.

The budget resolution was adopted last month not because members of Congress were sure about what they wanted to do but because of the April 15th deadline set in the Congressional Budget Act. In most years that date has not provided enough time for decisions to be made. Ironically, now that Congress has met the deadline two years in a row, there does not seem to be enough information available by April 15th for real decisions to be made.

The April results that are considered so important are available from CBO on a preliminary basis in early May and officially from the Treasury until close to the end of May. If this continues it means that the budget resolution, which essentially is Congress' fiscal plan for the rest of the year, should be considered little more than a draft.

One of the great ironies of this is that while the House is set to consider a major budget process bill this week (H.R. 4397), no one seems to have thought about changing the deadline for passing the budget resolution each year so that it could be done after the April results were in. That would slow down the start of the appropriations process each year, but it is not clear that the decisions made prior to receiving the April results are worth that much anyway these days.

At the very least, changing the deadline would mean that no one would have to ask the question at the top of today's "Budget Battles."

Question Of The Week

Previous Question. Two weeks ago, "Budget Battles" asked its readers to stand up and be counted on whether the District of Columbia should be reimbursed for the police overtime costs it incurred in connection with the World Bank demonstrations. Perhaps it was the fact that it only required a yes or no answer or maybe it was the emotions it generated. But, whatever the reason, more people took the time to answer this question that any other in the history of "Budget Battles." And it was a landslide. A whopping 72 percent said no, D.C. should not be reimbursed. The winner of the "I Won A Budget Battle" T-shirt, who was selected at random from all of the people who responded no, is Randy Cross, a program manager with the Computer Sciences Corporation.

This Week's Question. Here's your chance to win your own "I Won A Budget Battle" T-shirt and be known as the budget guru of your neighborhood when you wear it to go running. Assuming that Congress does not decide to revise the budget resolution it adopted last month, what is the only official job left for the House and Senate Budget Committees in this year's budget debate? Send your response (along with the address to which you want the shirt sent in case you win) to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, May 20. If there is more than one correct response, the winner will be selected at random from the correct entries.

]]>

Budget Battles: Defending Defense spending

Stan Collender — Wed, 03 May 2000 00:00:00 -0400

scollender@nationaljournal.com

The congressional budget resolution assumes that military spending will grow by $21 billion from fiscal 2000 to 2001-a 7.2 percent nominal increase, or a real increase of about 4.7 percent.

But put aside the numbers and percentages, which are far too inflammatory and too easily manipulated to be of any real use. The question that should be asked in any budget debate is not "how much" but "why that much?" At least as far as military spending is concerned, that has not yet happened this year.

As with any other federal agency or department, the Defense Department's budget should be expanded or cut based on the perceived need. If everyone in America already had basic reading skills, no one would seriously advocate that the Education Department spend more on remedial programs. Similarly, if an effective cure and vaccine for AIDS were developed, the need for additional federal spending by NIH on increased research of this disease would hardly be a question.

The same has to be true of the Pentagon. In the face of the administration and congressional desire to add significantly to this year's DoD budget, no one seems to be asking about the military threat-the Defense Department's equivalent to the question that should be posed to Education about basic reading skills and to NIH about AIDS-that requires an increase in defense spending in 2001. That makes the large increase included in the budget resolution highly questionable.

Thanks to the military's past achievements, the strength of the U.S. economy and the economic and political failures of many potential opponents, the current military threat to Americans appears to be significantly lower now than at any time in recent (and perhaps even not so recent) memory.

But so far this year, new millennium budget analysis seems to have been pushed aside in favor of Cold War-like rhetoric that says that any increase in Pentagon dollars is necessary, valuable, and worthwhile-regardless of the actual need. The same person who can see too many Bunsen burners in a lab or ovens in a school cafeteria as being a wasteful federal expense somehow does not see surplus tanks to be similarly unnecessary.

This is not to say that more defense spending is absolutely unwarranted; there may indeed be a number of reasons that the Pentagon's dollars should be increased-or at least reallocated from other military functions. For example:

In the current economic environment, when overall unemployment is very low and the Pentagon is competing against private sector jobs that pay better, don't involve basic training, and don't require employees to make a multiyear commitment, the military will have to increase the compensation it pays to fill its ranks. Without a draft to produce a steady supply of new recruits, or a workforce that needs the "employer of last resort" role the armed forces have so often played, the Defense Department will have to pay more and offer better living situations to get the people it needs.
The reduction in the number of people in uniform and the closing of overseas bases the Pentagon has been implementing since the mid-1980s should mean that, if it has not been done already, additional emphasis should be put on increasing transportation capabilities so that troops and materials can get to where they need to be when they need to be there.
The fact that the current threat may be low does not mean that it will always be that way. This indicates that (again if it is not already happening) more may need to be devoted to intelligence gathering.
For similar reasons, more may need to be spent on research and development and less on procuring weapons for current use. The old excuse of keeping procurement higher than is justified by current conditions so the assembly lines can be ready is no longer as valid in an era when industry is working with greater speed, productivity and agility than ever before. In addition, the low unemployment rate means that it will be inflationary to keep workers manufacturing things that have no productive value-like unneeded military hardware-because other employers will then have to increase wages to attract the fewer number of people in the job pool.

Asking and answering questions like these-that is, actually addressing the issue of the national need for increased military expenditures-is what has to happen. Simply picking a number because it sounds good politically, or because it applies a percentage that makes a good sound bite, makes as little sense for military spending as it would for every other part of the budget.

Question Of The Week

Last Week's Question. What has to happen legislatively for Congress and the president to be able to spend as much on discretionary spending in fiscal 2001 as was assumed in the recently adopted budget resolution conference report? Other than gimmicks, like declaring spending an emergency, the answer is simple-the cap on budget authority and outlays must be raised. But, as many readers pointed out in their response, the cap must be raised by changing the Budget Enforcement Act, so it must be done in legislation passed by Congress and signed into law by the president. Simply assuming in a budget resolution (which is a "concurrent resolution" that does not amend a statute and is not signed by the president) that the cap will be raised does not actually raise the cap. Congratulations to Michael Jones of the Department of Interior, this week's winner of the much sought-after "I Won A Budget Battle" T-shirt, who was selected at random from the many correct responses.

This Week's Question. If you have never played before, haven't won yet, or haven't won recently, here's your best chance yet to win your very own "I Won A Budget Battle" T-shirt. A brief item in last week's column about how the District of Columbia was trying to get the federal government to reimburse it for the police overtime it incurred during the World Bank meetings in Washington prompted a few readers to offer their own opinion on the subject. So this week everyone gets a chance to vote. The question: Should the federal government reimburse D.C. for its World Bank costs? Send your response-a simple "Yes" or "No" will be enough but comments are also welcome-to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, May 6. The winner will be selected at random from the group with the most number of votes.

]]>

Budget Battles: Busting the budget cap

Stan Collender — Wed, 26 Apr 2000 00:00:00 -0400

scollender@nationaljournal.com

Did anyone notice that the budget resolution conference report approved by Congress on April 14 plans a $59 billion increase in spending over the current cap on fiscal 2001 discretionary spending? The existing statutory cap on fiscal 2001 budget authority is $541 billion while the budget resolution assumes that $600 billion will be appropriated next year. The difference between the statutory limit and the budget resolution for outlays is smaller-"only" $46 billion.

This did not happen in the dead of night; the budget resolution conference report was adopted by a roll call vote in both the House and the Senate. Yet there was remarkably little discussion during the debate about the tremendous increase in spending the budget resolution approved. In fact, there was far more rhetoric about how Congress was providing less than the president proposed in his budget and so should get credit for being the more fiscally responsible-even though it, too, was recommending a large increase over current limits.

This April Surprise Is Not So Surprising

A week after the fiscal 2001 budget resolution was approved, stories appeared in The Washington Post and elsewhere about the fact that the fiscal 2001 on-budget surplus was likely to be higher than expected, perhaps by as much as $40 billion.

The stories were at least partially the result of the March spending and revenue figures released by the Treasury Department. That report showed that, after adjusting for a variety of anomalies, the federal government's bottom line through the first six months of fiscal 2000 was about $30 billion better than through the same period a year earlier.

But while some commentators continue to point to the almost annual updating of CBO's and OMB's estimates as an indication that the government's analysts are either politically motivated or use outdated methods, the truth is quite different. Assuming that the $40 billion improvement in the bottom line is the result of both spending and revenue revisions, it represents a change of only slightly more than 1 percent from the current forecast. Even if the improvement was due exclusively to higher-than-expected revenues, the change would still be just 2 percent.

Given the high amount of uncertainty involved in the calculations, no budget forecast-federal, state, local, corporate or personal-comes within 1 percent or 2 percent except by luck. To put this in perspective, a family with a total income of $75,000 would have to be able to project its bottom line for the year to within $1,500 to have the same margin of error. Given the cost of unexpected home repairs, the vagaries in gasoline prices, gyrations in the stock market and the incredible things employers are willing to do to hire workers these days, coming that close to what you forecast at the beginning of the year would be more accidental than planned.

Then Again, $40 Billion Could Be Enough

It may be little more than a rounding error, but the $40 billion increase in the projected fiscal 2001 surplus might be just what Congress needs to avoid a knock-down fight with the White House over appropriations this fall.

If the total assumed for discretionary spending is $600 billion, then the $21 billion increase for military spending ($290 billion in 2000 compared with $311 billion in 2001) means that there would be $289 billion for domestic programs. This is about $20 billion below the amount needed to stay even with inflation and almost $30 billion below what the president proposed in his budget. Therefore, even if the fiscal 2001 surplus is re-estimated upward by only three-quarters of what some are now saying will occur, Congress may be able to fund most or all of what the president requested and so avoid what is otherwise expected to be a bruising series of veto fights after Labor Day.

And Yes, I Live In The Suburbs...

The District of Columbia is insisting that the federal government reimburse it for costs incurred last week in connection with the demonstrations at the World Bank. District officials say that these are national rather than local responsibilities and so the $4 million to $5 million spent on police overtime and the like should come from federal coffers.

The fact that the World Bank is not a U.S. government agency does not seem to matter to the District. Neither does the fact that D.C. already earns hundreds of millions of dollars each year from federal workers who pay income taxes on what they earn (if they live in the District) and sales tax every time they buy lunch at a local restaurant or shop in a local store (regardless of where they call home). It also does not seem to register that a sizeable chunk of D.C.'s revenue is the result of tourists visiting Washington-all of whom pay sales taxes, occupancy taxes and gasoline taxes while they are here. The fact that Washington earns big bucks because of the steady stream of conventions that come every year because it is the nation's capital appears to be irrelevant. And how much does the District of Columbia earn when the city is full because of the Fourth of July festivities on the Mall, the Cherry Blossom Parade or the the inauguration every four years?

Question Of The Week

Last Week's Question. What should an award for federal budgeting, similar to an Oscar or an Emmy, be called? The most popular answer was some variation of "Porky." But the winner of this week's "I Won A Budget Battle" T-shirt goes to Jenelle Flocke, who works for the American Forces Information Service in the Defense Department, for suggesting that it be called the "Hitchcock." This is appropriate because, in Jenelle's words, "It's a mystery (how federal agencies come up with those figures), keeps me in suspense (What new program/initiative is coming down the pike that we'll have to embrace?), someone usually gets 'eliminated' (agency downsizing), and the entire process is one big production that receives a lot of 'billing.'"

This Week's Question. The first item in today's column talks about the $59 billion increase over the current cap on discretionary spending for fiscal 2001 that Congress assumed in the budget resolution. But making an assumption in a budget resolution is not the same thing as changing the cap. The question: Other than Congress and the White House waiving or ignoring the rules, what has to happen for spending to exceed the current limit? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, April 29, and you could win your own "I Won A Budget Battle" T-shirt to wear while enjoying your first gin and tonic of the season, that is, if you are over 21. (If you are the winner but are under 21, you'll have to have something nonalcoholic.) Proof of age will be required before the T-shirt is sent to anyone. If there is more than one correct response, the winner will be selected by random drawing.

]]>

Budget Battles: The new politics of the budget process

Stan Collender — Wed, 19 Apr 2000 00:00:00 -0400

scollender@nationaljournal.com

My graduate school dean, Aaron Wildavsky, authored The Politics of the Budgetary Process, one of the most important books ever written about how the federal government makes its spending and taxing decisions. It has been several years since Aaron died, and many more years since his book was last updated. And with all the changes in recent years, even Wildavsky's most ardent supporters and students will admit that the specific events and procedures he wrote about now have only a passing relation to how Congress and the president put the federal budget together.

But Wildavsky's central message-that the politics of the federal budget are critical to understanding what happens, and what can happen-continues to be absolutely relevant. In fact, the theme he first presented 40 years ago will be the most important key to how the budget debate is changed when the current process, the Budget Enforcement Act, expires at the end of fiscal 2002.

Put aside the more or less mechanical issues that often dominate the headlines, such as the date by which the president must send his or her budget to Capitol Hill and the deadline for Congress to adopt the budget resolution. Those will be mere Tinker Toys compared to the far tougher questions-all of which will be completely dominated by the political needs of the people making the decisions.

For example, one of the central questions of the next decade of budget decisions-whether Social Security should be included in the budget totals-will likely be determined far less by substantive arguments and far more by the phony issue of protecting the program's proceeds from being spent on anything other than Social Security.

Whether the pay-as-you-go rules for revenues and entitlements should be revised to allow cuts in appropriations and reductions in the surplus to offset a projected increase in mandatory spending or loss of revenues is far more likely to rest on whether Congress and the administration want to make tax cuts or spending increases easier or harder. The incontrovertible fact that annual appropriations cuts and projected surpluses are far too speculative to be relied on to pay for a permanent increase in mandatory spending or cut in taxes will simply not be as powerful an argument.

Should highway and mass transit spending continue to be put in its own category so that a certain level of spending for each is virtually guaranteed each year, regardless of other needs and the overall economic situation? Should the other 100 or more programs that have their own source of funds get similar treatment, or is it only highway and mass transit (with their long list of very powerful supporters) that should be treated that way?

Is reducing federal debt as important as increasing spending or reducing taxes?

Even some of the seemingly most wonk-like issues will be decided largely for political reasons. For example, many programs currently have fees that are scored as "negative spending" and so allow more to be spent each year than seems apparent from the budget tables. Income collected by other programs in similar situations, however, is sometimes listed as a receipt, and, therefore, sent to the Treasury. The issue is more of who controls the dollars coming in (and going out) than on evenhanded treatment and distribution.

And this year's election is likely to be anything but definitive when it comes to a mandate for action on budget issues. To the contrary, most current analyses project a slim victory for whoever wins the White House, and a narrow majority in the House and Senate by possibly different parties. If that is the case, it may be far too difficult for a consensus on these and similar budget issues to be reached before the current process expires.

Like the past two years, that will lead to a situation where the budget, spending and tax decisions are made according to ad hoc accommodations rather than procedural guidelines and requirements. There would be no caps on appropriations, no PAYGO rules for taxes and entitlements, and no sequesters when the rules are violated. Of course, if that happens it may well be because that is what the new politics of the federal budget will be all about.

Question Of The Week

Last Week's Question. Last week's question asking for an appropriate title for a children's book on the federal budget brought out the child in a great many readers. There were two winners of "I Won A Budget Battle" T-shirts. Previous winner Susan Friedman of the American Osteopathic Association wins for her suggestion of "a boxed set containing Harry Potter and the Vanishing Budget Surplus and Harry Potter Saves Social Security." Debi DeLoose, a 3rd and 4th grade teacher at the Lord of Life Lutheran Church in Fairfax, Va., wins for her suggestion of using Eric Carle's 1986 book, Papa, Please Get the Moon for Me without making any changes. Honorable mention (but no T-shirt) to David Kensinger of GOPAC for Where the Un-Authorized Things Are, a takeoff on the Maurice Sendak classic; Sandra Batton of the General Services Administration for her suggestion that The Never Ending Story works fine with no changes; Scott Redman of the Department of Agriculture for Old MacDonald Lost the Farm; and Bill Weber from the Washington office of Sen. Carl Levin, D-Mich., for Now We Are Six (Trillion Dollars in Debt), a take on the A.A. Milne classic.

This Week's Question. Oscar, Emmy, Tony, and Clio are the names of the awards given annually for the best in the movies, television, Broadway and advertising. If there were a similar award for federal budgeting, what should it be called? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, April 22, 2000, and you could win your own "I Won A Budget Battle" T-shirt to wear while watching the television shows the networks put on during the May ratings sweeps.

]]>

Budget Battles: The chicken and the egg

Stan Collender — Wed, 12 Apr 2000 00:00:00 -0400

scollender@nationaljournal.com

The mantra being used by all sides in this year's debate is a mouthful: "Our-budget-doesn't-touch-the-Social-Security-surplus-and-reduces-the-federal-debt."

President Clinton has gone to great strides to lay claim to the debt reduction issue, including calling a press conference at the White House on the same day in late January that a snowstorm shut down the rest of the nation's capital. It was also his budget last year that many say started the race to see who would not touch the Social Security trust fund surplus.

Meanwhile, Republicans in Congress have worked at least as hard to adopt the compound budget incantation as their own. For example, it was a prominent part of rhetoric used by Republican representatives when the House passed its version of the fiscal 2001 budget resolution in March, and was frequently repeated by the Senate Republican leadership as the most important feature of the resolution they passed last week.

The truth, however, is that the two issues are one and the same. A budget that says that the overall surplus should be no less than the Social Security surplus (no one would actually be "spending" or "dipping into" Social Security) automatically means that the trust fund surplus will be used to reduce publicly held federal debt.

If your budget has the first policy, there is no way to avoid having the second.

A few numbers may be instructive here. The "real growth" baseline published earlier this year by the Congressional Budget Office, which assumes that all appropriations will grow by the rate of inflation, projected a total fiscal 2001 surplus of $177 billion. About $166 billion of this was the "off-budget," or Social Security trust fund, surplus.

If the policy is what the administration and Congress keep saying it should be-that the overall budget surplus should be at least $166 billion so that it appears the Social Security trust fund is not being spent-then the federal government will take in at least $166 billion more in revenues than it will spend. Regardless of the source of the excess revenues, the federal government will be able to reduce its debt by this amount.

Between 2001 and 2010, the baseline projects a total surplus of about $3.2 trillion-$2.3 trillion from the Social Security trust fund, and an on-budget surplus of around $840 billion. Therefore, the fiscal policy of having the total surplus be no less than the Social Security surplus means that, regardless of whatever else is done on the budget, publicly held federal debt would be reduced by almost two-thirds over this ten-year period, from $3.6 trillion to $1.3 trillion.

The fact that both of these things will happen because of the budget policies being adopted is not in dispute; the computation being used by all sides in the debate will produce the result everyone is claiming. A surplus of any kind-on-budget, off-budget, or total-will result in excess revenues that, if not used to cut taxes or increase spending, will reduce the publicly held debt.

The real question is which of the two is the actual policy, and which is the by-product? If an overall budget surplus at least equal to the Social Security surplus is the goal, then reducing the debt is little more than an opportune calculation. If reducing the debt is the plan, then having a surplus equal to the Social Security surplus is merely one way to accomplish it.

Knowing which of these came first would be extremely helpful in figuring out what this year's debate means for the future. If debt reduction is the primary motivating factor, then not spending some of the on-budget surplus would also seem possible or desirable. If "saving Social Security" is the foremost goal, then the on-budget surplus should be fair game for tax cutters and spending increasers alike.

In the meantime, we are all left wondering which came first.

Question Of The Week

Last Week's Question. No one wins an "I Won A 2000 Budget Battle" T-shirt this week. The judges decided that a secret codicil (Any "Animal House" fans out there?) applied because the responses were . . . well . . . not particularly appropriate or good. Sorry.

This Week's Question. "Horton Hears An Outlay," "Babar The Revenue" and "The Little Budget That Could." If there were a children's book about the federal budget, what would it be called? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, April 15 and you could win an "I Won A 2000 Budget Battle" T-shirt to wear while reading the fiscal 2001 congressional budget resolution to lull your own Rugrats to sleep.

]]>

Budget Battles: The next budget process

Stan Collender — Wed, 05 Apr 2000 00:00:00 -0400

scollender@nationaljournal.com

The question I get asked most frequently these days as I give speeches and briefings around the country is simple: What should the next federal budget process do?

First, we need to admit that the current deficit reduction process not only will not work in the future, it is not working now. It is increasingly obvious that the wholesale avoidance and ever more brazen evasion of the current procedures will continue at least as long as there is a budget surplus. With on-budget as well as off-budget surpluses now projected through at least the end of the decade, it makes little sense to retain the current restrictions and limitations that have repeatedly been proven to be so irrelevant and avoidable.

Second, and even more generally, we need to acknowledge that there is no consensus whatsoever about what the next budget process should achieve. The "reduce-the-deficit" mantra that existed through the 1980s and most of the 1990s has not yet been replaced by anything that is close to being as commonly accepted. Any new budget process that tries to impose a policy outcome (such as tax cuts, spending increases or debt reduction) on an unwilling majority is a process that will be doomed from the start.

Third, we need to own up to the fact that we have no real economic experience dealing with federal surpluses and, therefore, that no one is really sure what should be done with them.

The distant past certainly provides no guidance. The last time the U.S. had four consecutive budget surpluses was 1927-1930, and the economy was completely different then than it is now. Recent experience is similarly unhelpful. Neither the Keynesian economic models that were so popular in the 1960s-1970s nor the supply-side theories of the 1980s and 1990s seem to make as much sense today as they did then-especially when what we all learned in Intro to Macroeconomics about the relationship between economic growth, unemployment, inflation, and interest rates, no longer seems to be true.

Fourth, the role of other players can no longer be just an afterthought. For example, the still-growing importance of interest rates means that the Federal Reserve Board may be at least as important an economic policymaker as Congress and the White House. In fact, the Fed's ability to act quickly in the face of today's very fast-paced market events almost guarantees that this is the case.

Fifth, the changes in the economy, the existence of surpluses rather than deficits, and the speed with which economic and market events happen and are reported mean it is time to acknowledge that some mechanism has to exist to allow budget decisions to be reviewed more often than once a year. Congress's role may be annual (or biennial) budgets, but some mechanism should be considered that will allow adjustments to be made when they are needed rather than when the budget process schedules them.

Sixth, now that there is no outcome that has to be achieved every year, the budget process must require some type of debate on overall national priorities. The military vs. education debate should be replaced, or at least preceded, by a debate over whether increasing the surplus will provide better overall economic results than, say, cutting an equal amount of taxes or increasing an equal amount of spending. This is what has been completely missing from the current budget process because the answer-cut the deficit somehow, anyhow-was preordained.

Finally, the work on any new process needs to start with a recognition that all of the questions above will be answered in the most political of all arenas: the budget debate. Regardless of how well-intentioned, a budget process that does not include a healthy dose of political reality-that representatives and senators will always try to get more for their constituents at less cost-will be as useless and will fail as assuredly as a process that is not designed to answer the prime questions in the first place.

Question Of The Week

Last Week's Question. Readers were asked to name the character from a current or previous television show that might make a big difference if he or she held an official position in the federal budget debate. There are two winners this week. Ashlie Warnick, who works in the Washington office of Sen. Peter Fitzgerald, R-Ill., gets an "I Won A 2000 Budget Battle" T-shirt for suggesting that Wimpy from the old "Popeye" series would be perfect for a number of possible budget positions. After all, she says, the person who came up with the phrase "I will gladly pay you Tuesday for a hamburger today" seems to have been born to create gimmicks like delayed obligations and postponed paydays. Previous winner Diana Meredith of the Office of Management and Budget also wins a T-shirt for her suggestion of the Borg, the wonderfully evil villain from "Star Trek: The Next Generation." According to Diana, the Borg would make a perfect president of the United States because its sole method for dealing with antagonists is to assimilate them while calmly announcing, "Resistance is futile."

This Week's Question. In keeping with the spirit of the topic of this week's column, readers are asked to provide a suggestion for how the federal budget process should be changed. Two "I Won A 2000 Budget Battle" T-shirts will be awarded, one for the best substantive recommendation and one for the most imaginative. Send your responses to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, April 8, and you could have a T-shirt to wear while completing your federal taxes at the last minute.

]]>

Budget Battles: Decaf, extra skim milk, extra sugar

Stan Collender — Wed, 29 Mar 2000 00:00:00 -0500

scollender@nationaljournal.com

The current debate over the fiscal 2001 congressional budget resolution is both sad and infuriating.

The sad part is that for at least the third year in a row, the budget resolution is going to be largely meaningless. The House and Senate were unable to settle differences on a fiscal 1999 resolution so a compromise was never adopted; the fiscal 2000 resolution was passed but it included no real decisions; and now the fiscal 2001 budget resolution will not really indicate what Congress will do the rest of the year on spending and taxes but instead will reflect only what is needed at the time the legislation is debated to get a majority to vote for it.

Contrary to what budget resolutions were intended to do, the 2001 budget resolution will not be a fiscal blueprint for the rest of the year. Instead, it will be forgotten or ignored by virtually everyone on Capitol Hill within a few days of its passage. It will guide no decisions and will limit nothing.

The infuriating part is all of the time, effort and energy being wasted on this meaningless debate.

The fire and brimstone rhetoric about the almost $597 billion for discretionary spending being above a nominal freeze ignores the fact that even a freeze would be above the statutory cap. Even the supposedly arch fiscal conservatives who are angry about $597 billion are themselves arguing for more spending than current law allows, and so are not without the budget sin of which they are accusing their colleagues.

More important, however, is that virtually everyone involved in this year's budget debate understands there is no way appropriations will be held to $597 billion, regardless of what the budget resolution says. With military spending almost certain to rise to somewhere around $307 billion, it is clear that neither Republicans nor Democrats are going to support what it will take to keep nondefense spending at $290 billion.

Furthermore, with the White House proposing some $612 billion for fiscal 2001 appropriations, the president's signature needed for Congress to avoid a shutdown and adjourn for the year, and little possibility of a two-thirds vote to override a veto, it has been clear for some time that that fiscal 2001 discretionary spending would be $10 to $20 billion more than the compromise budget resolution worked out by House Budget Chairman John Kasich, R-Ohio, and Senate Budget Chairman Pete Domenici, R-N.M.

The level of discretionary spending included in the fiscal 2001 budget resolution will do little more than define the amount of spending that will have to be approved using the various gimmicks that have become a standard part of the budget debate in recent years. The calculation is simple: take $612 billion, subtract whatever ultimately is included in the budget resolution, and you have the answer. Whether it is the Kasich/Domenici-proposed $597 billion, the $586 billion demanded by Sen. Phil Gramm, R-Texas, or some other number, the top line is likely to remain the same. The only question is whether the budget resolution accurately reflects this, or whether smoke, prestidigitation and silliness will be needed to get there.

The same is true on the revenue side of the budget. The Kasich-Domenici compromise already accommodates a tax cut that virtually no one thinks will actually be enacted this year. Why then is anyone demanding that the budget resolution assume that an even larger and less likely tax cut will be put in place?

And what does the column's headline have to do with any of this? When a customer asks for this type of coffee in certain establishments, the person behind the counter orders it by calling for a "Why Bother." The same could be said for this year's budget resolution debate.

Question Of The Week

Last Week's Question. On what date can the full House of Representatives start to debate the appropriations for the coming fiscal year even if the budget resolution conference report has not been adopted? According to Section 303(b) of the Congressional Budget Act, the answer is May 15. The winner of the "I Won A 2000 Budget Battle" T-shirt, who was selected at random from the correct responses, is Jim Carter, who works for the congressional Joint Economic Committee in Washington.

This Week's Question. What character from a current or previous television show might make a big difference if he or she held an official position in the federal budget debate? For example, how about Tony Soprano as director of the IRS? Send your response, which must include both the character and the budget job they should have, to scollender@nationaljournal.com by 5 p.m. EST on Saturday, April 1. You could win your own "I Won A 2000 Budget Battle" T-shirt to wear while doing the serious spring cleaning that you will no doubt be starting very soon.

]]>

Budget Battles: A 1970s rerun

Stan Collender — Wed, 22 Mar 2000 00:00:00 -0500

scollender@nationaljournal.com

Even though this is not a year when a big budget deal is likely or perhaps even necessary, a few small events are taking place each week that may add up to something more significant than anyone imagined.

This week, for example, we are waiting to see whether there will be enough votes in the Senate Budget Committee to report out the compromise fiscal 2001 budget resolution ("Budget Battles," March 15, 2000) developed by Chairman Pete Domenici, R-N.M., and House Budget Committee Chairman John Kasich, R-Ohio. With a very narrow 12-10 ratio of Republicans to Democrats on the committee, and Phil Gramm, R-Texas, and other Republican committee members threatening to vote against the resolution with the apparently united Democrats, this could be the beginning of a revolt that leaves the current budget process without enough support to be implemented.

If this happens in committee, all budget eyes will be looking at the Senate leadership, which will have to decide whether having a budget process is worth the political effort necessary to keep it. This situation has happened before-in the early days after the Congressional Budget Act went into effect in the late 1970s-when support for the new budget process in the House was in such doubt that the leadership had to step in year after year to make sure it was implemented. Had it not been for the commitment of Speaker Tip O'Neill, D-Mass., Budget Chairman Robert Giaimo, D-Conn., and especially Rules Committee Chairman Richard Bolling, D-Mo., the budget process would have never survived to the 1980s.

Beyond the obvious facts that this is a Republican-controlled Senate rather than a Democratic-controlled House, the biggest differences between then and now are that there is a surplus rather than a deficit, the budget process has already failed once and the leadership is divided.

The surplus means that a budget process may be less politically important then when there was a problem-the deficit-to be solved. The previous (and recent) failure of the budget process-when House and Senate Republicans failed to agree among themselves on a compromise fiscal 1999 budget resolution-could mean that senators may be thinking that they can survive without it. A divided leadership-Republican Deputy Majority Leader Don Nickles, R-Okla., is said to support Gramm's position-could mean that there is not enough political strength to get a budget resolution adopted this year regardless of what Trent Lott & Co. would like to do.

But Wait, There's More

All of this comes on the heels of last week's move by House Republicans to kill any chance of eliminating the federal tax on gasoline-something that would have been hard to imagine just a year or two ago.

Partly in response to the high price of oil, a proposal was floated by some Republicans to eliminate or temporarily suspend the 4.3 cents per gallon gas tax. Over the course of a few days, the plan started to gain some momentum. Then, in response to a strong statement made by another Republican-Transportation and Infrastructure Committee Chairman Bud Shuster, R-Pa.-that eliminating or suspending the gas tax would lead to dramatically lower federal spending, House Majority Leader Dick Armey, R-Texas, announced that the leadership had decided the tax should stay in place. And all of this occurred just as George W. Bush, who was one of the prime supporters of the gas tax suspension in the first place, went from being just a candidate to the presumed Republican presidential nominee.

In other words, not only have House Republicans now adopted policies that make them highly vulnerable to the same "tax-and-spend" label they used so effectively against Democrats during the 1990s, but they publicly repudiated and embarrassed their own presidential candidate at the same time.

And that little surprise came just a week or so after the Domenici/Kasich compromise, which did not assume a revenue reduction big enough to accommodate the tax cut that is a major part of candidate Bush's campaign.

Are these the same Republicans who through a large part of last year had to deal with rebellious members who wanted to reduce spending more so that the federal government could continue to be cut even though there was a surplus?

Are these the same Republicans who have so steadfastly advocated tax cuts over spending the past two decades?

Is this the end of the budget world as we have come to know it?

Question Of The Week

Last Week's Question. Last week readers had a straightforward question to answer: What does the current budget process say is supposed to happen if discretionary spending exceeds the existing cap and when is it supposed to happen? The responses, however, were far more fanciful than factual. Instead of the correct answers-a "sequester" occurs 15 days after Congress adjourns for the year, and cuts eligible spending by whatever percentage will bring the total down to the cap-"Budget Battles" readers came up with an incredible variety of possibilities, most of which cannot or should not be repeated in a place where their bosses might see them. The winner of an "I Won A 2000 Budget Battle" T-shirt, and one of the handful of people who got both parts of the answer right, is Natasha Moore, who works in the Washington, D.C. office of Sen. George Voinovich, R-Ohio.

This Week's Question. Here's a hint based on last week's experience: This question requires a factual rather than a creative answer to get an "I Won A 2000 Budget Battle" T-shirt of your own. The question: The budget process requires the budget resolution conference report for the coming fiscal year to be adopted by both houses before the full House can start debating appropriations for that year-unless what date is reached? Send your response to scollender@nationaljournal.com by 5 p.m. on Saturday, March 25, 2000. The winner of the T-shirt will be selected by random drawing if there is more than one correct response.

]]>

Budget Battles: Election year budgeting

Stan Collender — Wed, 15 Mar 2000 00:00:00 -0500

scollender@nationaljournal.com

Last week, Al Gore and George W. Bush became the presumptive presidential nominees of their respective political parties. Three days later the chairmen of the House and Senate Budget Committees reached a compromise on the amount of appropriated spending that would be assumed in the fiscal 2001 congressional budget resolution. If you had any doubt that the first event has already had and will continue to have a big influence on the second, consider the following.

Sen. Phil Gramm, R-Texas, has already said that he opposes the plan announced by Senate Budget Committee Chairman Pete Domenici, R-N.M., and House Budget Committee Chairman John Kasich, R-Ohio. Part of Gramm's reason is that the level of domestic spending in the budget resolution would be above a freeze; part of it is that the overall amount of spending would not provide enough room for the tax cut being pushed by the Bush campaign.

With the 12-to-10 ratio of Republicans to Democrats on the Senate Budget Committee, there may not be enough votes to get the budget resolution to the full Senate unless some Democrats support the Domenici plan and that is highly unlikely this election year. That means the GOP Senate leadership may have to resort to some unusual parliamentary maneuvers.

One of the devices being discussed, for example, is for Domenici to introduce the fiscal 2001 budget resolution as a separate bill if he does not have enough votes to get it approved in committee. According to the budget process rules, the full Senate can debate a Domenici-introduced budget resolution as of April 1, even if the Budget Committee has not reported it out.

This ploy would be based on an assumption that there will be enough votes on the Senate floor to pass a budget resolution. That is anything but certain with Democrats unlikely to provide many (or perhaps any) votes in this pre-election environment-especially for a budget resolution that some will characterize as reducing domestic spending below what the president proposed for education and other politically popular programs.

While the $307 billion for military spending included in the compromise will probably please a majority on Capitol Hill, the $290 billion that would leave for domestic programs could find little support. (Many Republicans have already indicated they want to spend more to avoid creating campaign issues.) This probably means another round of gimmicks similar to what Congress and the White House agreed to last year. There is already some talk, for example, of perhaps as much as $10 billion of the military spending currently included in the Domenici/Kasich compromise being classified as an "emergency," and that same amount being shifted to domestic programs.

The fact that such shifts and maneuvers are already being discussed point directly to what the Domenici/Kasich compromise is intended to be-a campaign document for Republicans. As drafted, the budget resolution would provide less overall spending, more for the Pentagon and a bigger tax cut than what was included in the Clinton budget. All of these are positions that the Republicans on Capitol Hill would like to claim as their own. The budget resolution will imply less for domestic spending than the president proposed, and therefore will appease a good part of the Republican base, but the extensive use of gimmicks later in the year will mean that individual members who want to vote for higher spending will get a chance to do so.

This also means that, in spite of the levels of domestic spending assumed in the budget resolution, the White House will get much of what it wants. This will make it less likely that there will be big veto fights late in the year, thereby avoiding talk of a Republican-caused government shutdown in the months before the election.

Question Of The Week

Last Week's Question. There were two questions from last week and two "I Won A 2000 Budget Battle" T-shirts to be awarded. The first question asked you to come up with an appropriate grand prize for a new television game show, "Who Wants To Be A Federal Budget Analyst." The winner is Bob Wolownik, a fellow in the Defense Leadership and Management Program at the Pentagon, for his suggestion that the prize be "The right to return each and every week to answer more and more questions." Honorable mention to Richard Kogan of the House Budget Committee for his suggestion of "A gift certificate, good at any hospital, for a lobotomy."

The second question asked was who should host this new game show. More than half of those who responded suggested Federal Reserve Board Chairman Alan Greenspan. But the winner of the "I Won A 2000 Budget Battle" T-shirt is Tevi Troy, who works in the Washington office of Sen. John Ashcroft, R-Mo., for his suggestion of Bob Dole. According to Troy, Dole "would ask the questions and give out the prizes in Senate-speak, a slightly better known dialect than budget-speak, to attract a wider audience."

This Week's Question. Last week there were two questions, and this week there is one question with two parts. Both the Clinton budget and the Domenici/Kasich agreement propose discretionary spending way in excess of the current cap for fiscal 2001. The questions: If the Budget Enforcement Act is not amended to raise the cap but spending exceeds the cap, what budget process enforcement procedure is supposed to occur to bring spending back to the cap and when is it supposed to happen? Send your response to scollender@nationaljournal.com by 5 p.m. on Saturday, March 18 and you could win an "I Won A 2000 Budget Battle" T-shirt of your own to wear at the health club while getting ready for bathing suit season.

]]>

Budget Battles: The reason for biennial budgets

Stan Collender — Wed, 08 Mar 2000 00:00:00 -0500

scollender@nationaljournal.com

What is the real motivation behind the sudden interest by a variety of representatives and senators in the two-year budget and appropriations process (S. 92) being promoted by Senate Budget Committee Chairman Pete Domenici, R-N.M.?

It is hard to argue with the rationale Domenici and his staff have been giving for changing to biennial budgets and appropriations-that the procedural requirements and political difficulties of the current budget process have made budgeting a year-round effort in Washington that leaves little time to do anything else. The seeming inability of Congress and the president to get the work done by the start of a fiscal year generally has meant that at best one budget debate ends just as the next must begin.

According to Domenici this has meant far less attention paid to oversight of the implementation of existing federal programs than ought to be the case. This would be corrected under S. 92 by requiring the budget and appropriations for the biennium (the next two fiscal years) to be enacted in the first session of each Congress-that is, in the first year after an election. The second session-which would always be an election year-would be available for oversight and non-budget legislation.

It is not at all clear, however, that everyone's motives are as pure as Domenici's appear to be.

For example, as one-year budget projections are continually shown to be incapable of being accurate for the whole year, it becomes increasingly obvious to many members of the House and Senate that two-year appropriations will seldom last through a full two-year period and that at least one supplemental appropriation would probably be needed every second session. This is likely to be a fairly large omnibus bill covering a number of different areas-exactly the type of legislation that allows pet projects and other provisions to be more easily hidden. It is also the type of bill that, outside the usual budget process, gets far less attention from the media and so is harder to follow.

In addition, this type of legislation puts the appropriations committees and appropriators firmly in the political driver's seat, as other members have to come to them to get their project or provision included.

There is also a question as to whether the authorization committees will really devote any more time to oversight even if they have it. These committees have little to do with the current one-year budget process except when there is a large reconciliation bill involving programs within their jurisdiction. These committees could have already been doing the heightened oversight that S. 92 envisions-and the fact that it has not been happening up to now may be a strong indication that there is little interest.

Furthermore, reconciliation efforts like those that have occurred over the past decade will be far less likely in the era of budget surpluses we seem to have entered. As a result, much of the time the authorization committees have had to spend up to now under the one-year budget process is likely to be freed up for other things anyway-even if a two-year budget and appropriations process is not enacted.

It is also possible that interest in two-year budgets and appropriations has increased as members of Congress have started to realize that the astoundingly good economic performance of the U.S. economy means that voters don't expect or perhaps even want their representatives and senators to be voting very often on economic legislation.

But the real motivation for the sudden increase in support for S. 92 may be far less altruistic. Passing the budget and appropriations in the first session of a Congress would mean there would be little to keep representatives and senators in Washington when they could be running for re-election. A two-year cycle would allow them to return to their districts and states far earlier to campaign full time than they can do under the current annual budget and appropriations process.

S. 92 would eliminate nearly all the anxiety that many members of Congress feel when, in a year like this, there are many close races, the majority in a least one chamber is up for grabs and there is not enough time for all the legislative business that must get done before the fiscal year.

The easiest way to think about this is as follows: If S. 92 were already in effect, the budget and appropriations for the coming fiscal year presumably would have been enacted as required by last Oct. 1. This would mean that Congress could adjourn for the year right now and campaign non-stop for the next eight months.

Question Of The Week

Last Week's Question. The question was, "If there were to be a national museum about the history and culture of the federal budget, what should it be called?" Judging from the many, many, many responses suggesting something like the "National Museum of Pork" you would think that everyone was trying to create a building dedicated to a particular branch of agriculture. The winner of an "I Won A 2000 Budget Battle" T-shirt, however, is Kathy Ruffing, a long-time staffer at the Congressional Budget Office, whose unusual answer must be quoted in its entirety to do it justice:

Face it, the Museum of Budgeting would be a flop. Who besides us would visit? And how could the curator mount any exhibits? We veterans of the budget wars would never donate our old stuff, knowing that someone, someday, will ask about the Grace Commission recommendations, or the cap adjustments resulting from Operation Desert Storm, or . . .
The solution is to give up the notion of a museum and settle for a memorial in some heavily-trafficked place. I envision a bronze statue of the Unknown Budget Analyst, wearily surrounded by the tools of his or her trade: computer, pencils (sans erasers), Budget Appendix, Budget Enforcement Act (heavily thumbed), a vast collection of Monthly Treasury Statements, a dartboard, Magic 8-Ball, etc.

And where to put it? In the ballpark.

This Week's Question(s). Because we have a surplus of "I Won A 2000 Budget Battle" T-shirts, there are two chances to win this week. The first question: What should the grand prize be on a television game show called "Who Wants To Be A Federal Budget Analyst?" The second question: Who should be the host of said game show? Send your response to scollender@nationaljournal.com by 5 p.m. EST on Saturday, March 11, and you could win your own "I Won A 2000 Budget Battle" T-shirt to wear while watching Regis, Chuck and Maury hand out serious money on their own shows over the next few weeks. ]]>

Budget Battles: Will there be a resolution?

Stan Collender — Wed, 01 Mar 2000 00:00:00 -0500

scollender@njdc.com

With the continuing surplus and the difficulties Congress seems to be having agreeing on how to proceed this year, two questions keep popping up over and over: Should the House and Senate even try to adopt a fiscal 2001 budget resolution, and will it make any difference if they don't?

Legally, Congress has no choice but to pass a fiscal 2001 budget resolution. The House and Senate are required by the Congressional Budget Act to adopt a budget resolution and, because all members of Congress take an oath to uphold the laws of the land, they seemingly have to do so.

However, there is no legal penalty if Congress fails to comply with the budget resolution requirement. When the Congressional Budget Act was passed in 1974 the assumption was that compliance would not be much of a question. And we know from what happened after the House and Senate failed to agree on the 1999 budget resolution conference report that, at least in the current environment where having no budget deal is considered acceptable, there is little or no political penalty either.

But legalities and politics aside, not adopting a budget resolution conference report will make the rest of this year's debate far more difficult for Congress. Without it, there will be no framework for the decisions that still have to be made. That, after all, was the original reason for budget resolutions-to give Congress the opportunity to put all spending and revenues together in one place and make decisions for the rest of the year when the priorities are implemented in other legislation.

This means that if Congress fails to adopt a budget resolution this year, it will give the White House an additional advantage in a debate where the president already holds all of the high cards. Without a budget resolution there will be no agreement among House and Senate Republicans about the priorities they want to pursue, nor will there be an agreed-upon plan for negotiating with the administration on appropriations decisions. This will make it much harder for the leadership to get much out of the negotiations and much easier for the president to put together winning coalitions on a bill-by-bill basis.

It will also probably lengthen the budget process somewhat. Not having budget resolution will mean that when the House and Senate should be focusing solely on the fiscal 2001 appropriations, there could still be an effort by some members to get a tax or entitlement change enacted. That is a decision that should be made in the budget resolution, since it would shape the legislative agenda for the rest of the year.

No budget resolution would also mean that the priorities that should be agreed upon first will instead have to be thrashed out as each bill is debated. Instead of a position that represents the party, it will be every representative and senator for themselves.

The experience with the 1999 budget process shows that we can muddle through without a budget resolution, but that was said to be a one-time aberration. To make certain that would be the case, congressional leaders last year worked hard to erase the memory of the first time a budget resolution conference report was not adopted by making sure that the next year's resolution-fiscal 2000-not only was adopted but done so by the April 15 statutory deadline.

If there is no budget resolution again this year, however, it mean that Congress will have failed two of the past three years-and that the "aberration" might really have been the beginning of a trend.

It will also bring back many of the concerns that were typical of the years immediately after the Congressional Budget Act was adopted and the budget committees needed direct and substantial involvement by the leadership to get budget resolutions adopted. At that time the budget committees thought reconciliation was too risky to be tried because a failed bill would indicate little support for the budget process that had just been enacted.

That, perhaps, is the ultimate reason Congress should adopt a fiscal 2001 budget resolution. Without it-and the commitment to a budget process that approval would imply-it is hard to see how these decisions will not be anything but much harder in the future.

Question of the Week

Last Week's Question. "What is the limit on the number of budget resolutions that Congress can adopt each year?" The answer is that there is no limit. The initial version of the Congressional Budget Act required Congress to pass two each year and in some years the second resolution was modified further, essentially a third budget resolution. The requirement for a two budget resolution has since been eliminated, but Congress can always revise an existing budget resolution by adopting a new one. The winner of the all new "I Won A 2000 Budget Battle" T-shirt, who was selected at random from all of the correct responses, is Bill Weber, who works as the tax/budget legislative assistant for Sen. Carl Levin, D-Mich.

This Week's Question. The Smithsonian Institution will be opening a number of new museums in the coming years celebrating particular aspects of American history, life and culture. If there were to be a national museum about the history and culture of the federal budget, what should it be called? Send your response to scollender@nationaljournal.com by 5 p.m. EST on Saturday, March 4, and you could win your own "I Won A 2000 Budget Battle" T-shirt to wear while watching the early rounds of this year's NCAA basketball championship.

]]>

Budget Battles: Punctuality and projections

Stan Collender — Wed, 23 Feb 2000 00:00:00 -0500

scollender@njdc.com

Last week's Budget Battles featured a heaping serving of tidbits about the Clinton fiscal 2001 budget. It is only fair, therefore, for this week's column to serve up some tasty morsels from the congressional side of the budget debate.

You Want It By When? (1)

The word from inside the budget committees is that the leadership in both chambers wants the fiscal 2001 congressional budget resolution conference report passed by the close of business on Friday, March 10. That deadline, being two-and-a-half weeks from now, sounds very possible. But with the House currently out of town for the President's Day recess and critically important presidential primaries on March 7 that are likely to prevent votes both that day and the day before, March 10 is really only six or seven legislative days away. Even that tally assumes the House and Senate will meet and vote on Friday, March 3, and Friday, March 10, which is anything but certain.

You Want It By When? (2)

Passing the budget resolution conference report by March 10 would clearly be a new speed record, and after last year-when the House and Senate were both able to adopt the fiscal 2000 budget resolution conference report by the April 15 statutory deadline-the leadership would no doubt like to maintain Congress' new punctuality. Don't hold your breath, though.

Not only will making the self-imposed March 10 deadline be nearly impossible, but duplicating the April 15th feat may be a problem as well given how little legislative time is left between now and then. Even if Congress conducts legislative business on Fridays and on the Mondays when there are no primaries on Tuesdays, that still leaves only 28 legislative days before the April 15 deadline. If Mondays and Fridays (when Congress typically does not conduct legislative business this time of year) are excluded, there are a paltry 17 days.

Is There A Number In The House... And Senate?

House and Senate leaders supposedly have also told the budget committees that they expect them to agree on "the number" for fiscal 2001 by March 3 so that the budget resolutions can be drafted, debated, and passed by March 10. The "number" in question is the size of the on-budget surplus. Unlike previous years, when the amount available for spending increases or tax cuts was determined by budget process rules and restrictions, this year it will be the size of the surplus (not counting Social Security) that provides the guidelines.

The basic difference is the amount of assumed discretionary spending. As of late last week, House Budget Committee Chairman John Kasich, R-Ohio, and Senate Budget Committee Chairman Pete Domenici, R-N.M., were said to be still holding out for their initial positions-leaving them billions apart. Kasich wants to assume that, with a few adjustments, fiscal 2001 appropriations will be frozen in nominal terms at their fiscal 2000 level. Domenici, on the other hand, supposedly thinks that a nominal freeze is unlikely and wants to assume enough growth to cover inflation.

So Much For Long-Term Projections

The trend in recent years for federal budgets and budget resolutions to be developed and discussed in multiyear terms may go by the wayside this year as congressional budgeteers try to accelerate and expedite the budget process. In a private briefing this week for a select group of reporters, one very senior Senate budget official indicated that the focus of this year's debate would be on fiscal 2001 only. Although the budget process requires multiyear projections in a number of instances, this year those forecasts might be little more than straight extrapolations that are announced as having have no long-term policy implications.

It is not surprising that this strategy would come from the Senate, where tax cuts are a far lower priority than in the House. If the Senate plan prevails, most or all of the spending and revenue decisions would be only for fiscal 2001-which would kill any chance of permanent changes in entitlements or taxes. This would include the elimination of the marriage penalty the House has already passed, which would have an impact on revenues every year after it went into effect. It would not, however, prevent a one-year extension of expiring tax provisions, a one-year change in an existing tax law, or appropriations revisions for fiscal 2001.

And So Much For Long-Term Cap Changes

The word from both sides of Capitol Hill is that the Clinton proposal to extend the caps on appropriations through the end of fiscal 2010 will not be considered. In fact, there is growing sentiment to not even consider the increases in the caps for 2001 and 2002. This does not mean that Congress plans to keep spending at or below the existing caps-only that there may not be a formal effort to raise them officially.

The reason seems to be that few Republican representatives and senators want to go through what they expect to be a protracted debate on the budget process, especially when there is little or no sentiment for extending the caps or the pay-as-you-go rules for taxes and entitlements. Instead, the current preference may be to just spend up to (or slightly below) the level proposed by the president without voting to raise the caps, and hope that the administration will enforce what it proposed rather than the statutory limits.

Question Of The Week

Last Week's Question. Some Budget Battles readers are going to great lengths these days to get one of the all-new "I Won A 2000 Budget Battle" T-shirts. One of the responses to last week's question, which asked, "What is the limit on the number of reconciliation bills that Congress can consider each year?" was sent in the form of a poem. Another provided a detailed history of reconciliation. A third provided a detailed history of that reader's previous entries to the Question of the Week. Budget Battles appreciates the effort, but please keep in mind that the winner is selected by random drawing when there is more than one correct answer, not by the novelty of the response. Of course, if it makes you feel better to send your response in a unique and creative way, please don't hesitate.

The correct answer to last week's question is that there is no limit. Although the original concept was for Congress to consider and pass just one reconciliation bill, that has changed over the years. As a result, in some years there have been instructions in the budget resolution that require more than one reconciliation bill to be drafted and considered. The winner of an "I Won A 2000 Budget Battle" T-shirt, who was indeed selected by random from the multiple correct responses is Booth Jameson, who works for Rep. Michael Castle, R-Del., here in Washington.

This Week's Question. The fact that there can be more than one reconciliation bill every year does not mean that there will be the same number of budget resolutions as reconciliation bills. The question: "What is the limit on the number of budget resolutions that Congress can adopt each year?" Send your response to scollender@nationaljournal.com by 5 p.m. EST on Saturday, Feb. 26, and you could win your own "I Won A 2000 Budget Battle" T-shirt to wear while trying to figure out how to get "Who Wants To Be A Millionaire" to return your call. The winner will be selected by random drawing if more than one reader provides the correct answer.

]]>

Budget Battles: The budget hokey-pokey

Stan Collender — Wed, 16 Feb 2000 00:00:00 -0500

scollender@njdc.com

In what should be taken as a sign of things to come, the federal budget debate virtually disappeared last week just two days after the Clinton fiscal 2001 plan was sent to Congress.

Republican reaction to the Clinton budget was relatively low-key, and the usual week of post-release hearings were replaced with a limited number of seemingly obligatory sessions that failed to attract much media attention. And on the day before the president's budget was released, the Sunday talk shows-which usually feature the director of the Office of Management and Budget, the secretary of the Treasury and the chairs of the House and Senate Budget Committees-completely ignored the topic.

So with no major controversies to comment on, here are a few savory tidbits to tide everyone over:

You Put Your Right Foot In, You Put Your Right Foot Out

One of the gimmicks used by Congress and the Clinton administration last year to get around the tight spending caps was to delay the last federal payday of 2000 so that the outlays would not occur until 2001. According to the Clinton budget, that delay "saved" $4.3 billion. It also, of course, increased fiscal 2001 spending by that same amount. So what does the administration want to do now that Congress and the White House are focused on meeting the 2001 spending cap? Not surprisingly, the president's budget proposes that the payday occur when it was originally scheduled, that is, in fiscal 2000. The fact that this would save another $4.3 billion in 2001 is, of course, never mentioned. Instead, it is part of what the budget says is "restoring budgetary conventions."

Other Conventions The White House Wants To Restore

The delayed payday is not the only gimmick the administration wants to "restore" and, in so doing, use twice. The budget also proposes that the prohibitions provided to certain federal agencies against obligating about $1.8 billion until late in the year be reversed. This will bring the spending that would have otherwise occurred in 2001 back into fiscal 2000. The budget also proposes that $14.4 billion in advance appropriations enacted last year now occur in fiscal 2000.

Can All This Be Added Without Triggering A Sequester?

The restorations in the Clinton budget should cause the current fiscal 2000 caps on discretionary spending to be breached and, therefore, for a sequester to occur. However, the budget also proposes to increase the fiscal 2000 caps-so if Congress goes along with the cap increase, the higher spending will not violate the new limits.

If Congress does not agree to raise the 2000 cap, then it will not be able to bring the fiscal 2001 spending into 2000 as the administration is proposing. This would also mean that Congress will have $14.4 billion in additional budget authority and about $6.1 billion in additional outlays to fit under the fiscal 2001 cap. This is why the Clinton proposal-which in the past would have drawn almost immediate criticism from congressional Republicans-has gone almost without comment.

Speaking Of New Spending Caps ...

As predicted (Budget Battles, Jan. 19), the Clinton fiscal 2001 budget included a proposal to increase the existing spending caps for fiscal 2000-2002 and to extend the caps beyond 2002. What was not expected, however, was that the proposed extension would be all the way through 2010. Under the administration's plan, the caps for both budget authority and outlays would increase by slightly less than 3 percent a year, or just above the projected rate of inflation. There would not be a separate cap for military and nonmilitary programs; they would all be covered in the same "other discretionary" category.

Also under the plan, the exiting caps for highway and mass transit would expire at the end of 2003, at which point these programs would be covered under the overall cap as well. The current cap for violent crime reduction would not be extended beyond fiscal 2000. A new cap for the administration's "Lands Legacy" initiative would be created starting in 2001.

And PAYGO, Too?

The Clinton fiscal 2001 budget also proposes to extend the pay-as-you-go enforcement system for revenues and entitlement programs through 2010.

The PAYGO rules will be far more difficult to extend than the appropriations caps. Many Republicans on Capitol Hill and elsewhere view PAYGO as the principal reason there has not been a major tax cut in years and are adamant that the rules not be extended. At the very least, they will want the rules revised so that budget surpluses and discretionary spending cuts can both be used to offset the impact of a tax cut.

It is not at all clear at this early point in the year whether the caps can be extended without PAYGO, and vice versa. It is also not clear whether there is any interest in Congress in doing anything other than just raising the caps for 2000-2002. For that matter, it is also not clear whether the White House will be willing to raise the existing caps unless the caps and PAYGO are also extended. In addition, it is hard to see how these budget process changes can be enacted this year in light of the limited time that exists for legislative work.

Ever Heard Of Section 303?

The first major step in the congressional budget process is supposed to be the passage of the budget resolution conference report. This was done so that Congress could see how tax and spending changes fit within the whole budget it had promised to do for the year. Doing it any other way would mean that the budget would have to be adjusted for tax and spending initiatives already considered. To make sure that this happens, section 303 of the Congressional Budget Act creates a point of order against spending or taxing legislation that is considered before that year's budget resolution conference report is adopted.

However, neither this point of order nor the general principal stopped the House last week from passing the elimination of the so-called marriage penalty in the tax code. The House simply waived the point of order before proceeding with the tax change.

The ironic thing about the House's waiver of the Budget Act is that the move was needless. Even the biggest supporters of the marriage penalty change admit that there is little or no hope that the Senate will consider the legislation before the budget resolution conference report is adopted. The Senate will have to wait for the tax change to be considered as part of a reconciliation bill, which can only be done pursuant to a directive in a budget resolution. The reason? Reconciliation bills cannot be filibustered, while there is a virtual guarantee that the stand-alone tax bill just passed by the House will be.

Question Of The Week

Last Week's Question. Never mind the CD-ROM that is already produced by the Office of Management and Budget, last week's question asked you to come up with "... another, better way to make (the president's budget) available to the public so that more people see it." The most popular answer by far was to print it on toilet paper. A few others suggested that it be put on the Internet (Note: Take a look at http://w3.access.gpo.gov/usbudget). The winner of an all-new "I Won A 2000 Budget Battle" T-shirt, however, is freelance writer and consultant Ned Lynch. Ned, a veteran of the House Committee on Government Reform's Civil Service Subcommittee, suggested that Oprah make the budget the February selection for her book club.

This Week's Question. Want your own "I Won A 2000 Budget Battle" T-shirt for those special moments when being a wonk impresses your friends? The last item in today's "Budget Battles" talks about reconciliation. The question: What is the limit on the number of reconciliation bills that Congress can consider each year? Send your response to scollender@nationaljournal.com by 5 p.m. EST Saturday, Feb. 19. The winner will be selected by random drawing if more than one reader provides the correct answer.

]]>