President Clinton and his team of budget advisers are still savoring the afterglow of last summer's five-year balanced budget law and the appropriations bills they just wrangled from Congress for this fiscal year. But there's no rest for the weary: `Tis the season to craft next year's spending plan, with all the little flourishes that will be making their way into Clinton's State of the Union address on Jan. 27.
But don't look for any expensive new ideas for fiscal 1999, because the message that's making the rounds of the executive branch is: The money's not there. "It's really tight," a budget official said.
As Clinton starts writing his first spending blueprint since the five-year agreement he reached with Congress four months ago, it's clear that his best budget days are behind him. Statutory spending limits on programs the President and Congress have the discretion to finance--everything from Head Start to the national parks--mean that the budget Clinton will send Congress on Feb. 2 must put the squeeze on his innovations. And that will hold true for the remainder of his term.
Those limits, known as discretionary spending caps, leave little room for Clinton to build on the "investment" spending he got from Congress for the fiscal year that started on Oct. 1. Budget law requires that wherever he adds padding, he must take out an equivalent amount of stuffing.
Clinton's options all have drawbacks. He could request fiscal 1999 spending below this year's level for certain programs in order to make room for his priorities. But White House officials say it's tough to identify what Clinton might cut that would add up to much. Or Clinton could offset new spending with new revenue sources, although revenue-raisers that smack of tax hikes are political death. Or, the White House could seek to raise the spending caps--an idea that's being discussed but is probably unlikely, given how it would fuel conservatives' charges that Clinton is a spendaholic.
As the President and his budget advisers decide what to emphasize in the 1999 budget--their latest meeting was slated for Dec. 5--budget director Franklin D. Raines has advised federal agencies that anything new they might want has to compete for a pot of roughly $5 billion, White House officials said. Because most departments are already baying about the effects of the discretionary spending limits, the skirmishes for more money could get nasty. Total discretionary spending for fiscal 1999 is capped by law at $533 billion--or $256 billion, not including defense--a mere 1 per cent increase over fiscal 1998. The White House persuaded Congress to raise the ceiling for 1998, instead of lowering it on the way to a balanced budget by 2002, to cover the Administration's wish list for new spending. But planned pay raises for federal employees, budget officials say, could use up every bit of the extra 1 per cent for 1999.
The consequence: If Clinton wants anything new, he'll have to put it on ice or jettison something old. For a President whose agenda relies on "investments," the brave new world of a balanced budget has its hazards.
"Just because the deficit is coming down doesn't mean the President gives up his desire to do other things," said Stanley E. Collender, a budget policy expert with the New York City-based public relations firm Burson-Marsteller. "The fact that the budget is being balanced is not the President's only goal."
Clinton's budget advisers are focusing on increasing spending and expanding tax incentives in familiar ways--such as on school construction, educational quality, trade promotion, environmental protection (including $5 billion over five years for tax breaks and research on global warming), subsidies for child and dependent care, an expansion in individual retirement accounts, reforms in managed care and affordable health care for the near-elderly.
Top White House policy and communications advisers have been meeting weekly to talk about how to frame what Clinton wants to do in his State of the Union address. Aides predict a handful of new mini-proposals, plenty of bully pulpit encouragement for companies and states to do things Washington can't afford and lots of chest-thumping about the Administration's accomplishments.
"There will be some new ideas that are thematically consistent with the policies the President has been advocating over the years," a senior White House official said--"fiscal responsibility, open markets, economic investment in the future and tools needed to take responsibility." Clinton can't get away with rhetoric, for he's required to specify how he'd pay for his policies. Many proposals he supports in theory would be expensive in practice.
The White House also has its eyes on prospective surplus spenders on Capitol Hill--lawmakers of both parties who anticipate that favorable economic conditions may produce a budget surplus as early as next year, with the prospect of being able to raise spending or cut taxes yet again before 2002. While Clinton is only too eager to embrace the political symbol of a budget surplus--and the sooner the better--he's wary of Republican calls to use black ink to cut taxes for the rich.
White House officials have talked about using the 1999 budget to lay out what Clinton would like to do with a surplus, whenever one materializes. Suggestions include a symbolic gesture to dedicate it to keeping Social Security solvent and reducing the $5.4 trillion federal debt. Although some officials said it's unlikely that Clinton will start talking about a surplus when the government is still running a deficit, others argued that proposing to cut the national debt would let him claim the fiscal high ground and help bring long-term interest rates even lower. Reduced mortgage rates, for instance, could be worth more to low- and middle-income families than any tax cut Republicans might champion.
The budget outlook may be sunny from the standpoint of the deficit. But it gives Clinton little chance to respond to ideas the Republicans put forth as the midterm elections and the 2000 presidential race draw near. For instance, while many senior White House officials think Clinton needs to offer something more than the status quo to counter GOP calls to lower taxes and abolish the Internal Revenue Service, he can't necessarily afford the things that would give him a political bang. It wouldn't be cheap to even partially fix the so-called marriage penalty (a Republican proposal to eliminate it entirely would cost $18 billion a year) or to relieve middle-class taxpayers of the burden of the alternative minimum tax. The alternative tax was conceived to make sure that wealthy taxpayers don't wriggle out of taxes entirely, but because it's not indexed for inflation, it will soon affect the not-so-rich, too.
More so than with his last five budgets, when he hadn't signed up yet for a long-term plan to erase the deficit, Clinton is on a leash. The budget achievement he'll tout in January as a necessary bridge to the 21st century also limits the magnitude of his next call to action. "I think the constraints are even greater," a White House official said. "It does not make the job any easier."
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