Low Deficit, High Anxiety

Low Deficit, High Anxiety


Now that many analysts believe the federal deficit will fall to $50 billion or less in fiscal 1997, budgeters on Capitol Hill and at the White House aren't eager to make the new deficit projections official any time soon. They fear that Members of Congress either will want to spend the new pot of money or will be reluctant to cast tough votes on budget balancing bills that may seem less necessary with the deficit already on the wane. Above all, they worry that their hard-sought budget deal could become--gasp!--irrelevant.

At a July 1 meeting in the offices of House Speaker Newt Gingrich, R-Ga., several of the Republican leadership aides and committee staff members in attendance brought up the scuttlebutt that higher-than-expected June tax receipts might lead forecasters to reduce their fiscal 1997 deficit estimate.

The Congressional Budget Office (CBO) had already revised this year's deficit forecast downward from $122 billion to $67 billion in May. That made it possible for negotiators to clinch the budget deal that month with less pain--or, some said, less real reform--than anticipated. Wouldn't it be great, the GOP aides wondered, if more manna was about to rain down from heaven?

Not so fast, replied Senate Budget Committee staff director G. William Hoagland and his House Budget Committee counterpart, Richard E. May. "I and Rick May both said: `No. Stop. Don't go down that path,' " Hoagland said in an interview. Neither of the budget bills passed by the House and the Senate cuts spending by as much as the budget deal calls for, he notes. "If there is any additional good news in the deficit estimate for 1997, we don't need to run out and spend that again or reduce our savings," Hoagland said, "because in some ways we've already taken advantage of it by not having done what we said we were going to do over the 10-year period."

The following day, at another meeting attended by Administration officials and top Democratic and Republican Hill aides, Hoagland asked Office of Management and Budget (OMB) director Franklin D. Raines when his agency might complete its "mid-session review," the deficit forecast normally due on July 15. With intense negotiations over the budget bills approaching, he told Raines, coming out with the projection on schedule would be "not that helpful" and might "confuse" the budget process.

The next day, Hoagland said, Raines's deputy Jacob J. (Jack) Lew called to say OMB officials agreed. An Administration official said both Clintonites and GOP leaders don't want to see the budget deal unravel because of good news on the deficit front.

OMB spokesman Lawrence J. Haas said that no final decision has been made on the release date of the Administration's deficit forecast, but that there's "general agreement that it would be more productive to do it after [budget] reconciliation, which we expect to have wrapped up by early August." The CBO's next forecast is also due in August, but Hoagland said it might not be released until September.

Of course, amid all the budgetary frenzy, it's also worth noting that some analysts caution that the latest revenue trends may not last.