Budget With a Lexicon All Its Own

Word has filtered out from secret Washington meetings that the White House and congressional budget-writers are near agreement on a framework for a fiscal 1990 budget. But there will be no official announcement until the deal is done. As House Majority Leader Thomas S. Foley (D-Wash.) put it: “Nothing is agreed to until virtually everything is agreed to.”

Sound like double talk or obfuscation? Perhaps. But that is not unusual when Washington talks about budget matters. Ronald Reagan’s Administration coined the term revenue enhancement as a substitute for tax increase. The Bush Administration has proposed to spend some $50 billion to bail out failed savings and loan companies without the money even showing in the budget, by simply declaring that the item is “off-budget.”

And now, the Administration is trying to write a new definition for budget cuts and budget freezes. This effort attempts to institutionalize Reagan’s longstanding irritation with critics who claimed he was cutting the budget when he actually saw himself as spending more money.

For some years now, Congress has used a “base-line” budget as a foundation for each year’s new budget. The base-line budget reflects the work of a specific program at last year’s level plus enough new money to offset inflation and to accommodate natural growth in the program.

Let’s say that the federal food-stamp program cost $100 last year to serve 10 qualified recipients with $10 of benefits each. But in the new year, 15 people qualified for the program and the cost of the food to be provided went up by 5%. To maintain the program at a base-line level, Congress would have to appropriate $157.50 in the new budget year. That is last year’s $100 plus $50 for the five new recipients and an additional $7.50 for inflation.

The President could budget $135 for the program and claim the budget was being increased. But this would be a cut under the base-line budget concept because one of two things would have to happen: 1) The number of recipients would have to be reduced, or 2) If all 15 recipients were included in the program, each person’s benefit would have to be cut compared with the level per individual the previous year.

What emerges here is President Bush’s flexible definition of his flexible budget freeze. Bush applied the “flexible freeze” to $136 billion in domestic-spending items that would be held at the previous year’s dollar amount, with no increase for inflation. Under the base-line concept, that is not a freeze, but a real cut in services. Bush also claimed he was freezing the defense budget although, in fact, defense spending was adjusted for inflation.

So a freeze is not necessarily a freeze. A cut may be a cut, or it may be a freeze. While this may sound like a trivial dispute, Herbert Stein, a former chairman of the President’s Council of Economic Advisers, says the Bush arguments show a disdain for serious budget analysis. Use of the base-line budget concept is an attempt to go beyond surface numbers and get an appreciation of what is really going on in the budget, said Stein, how a senior fellow at the American Enterprise Institute. This is a way to distinguish between real policy changes in a program and nominal ups and downs caused by fluctuating prices. To ignore such distinctions would render much talk about the budget meaningless, he said.

Surely so, Mr. Stein.