As Budget Battle Continues, U.S. Posts Historic Surplus

The federal government officially posted a $122.7-billion surplus Wednesday for the fiscal year that just ended, its biggest excess ever and the first time in more than three decades that the budget ended in the black for two consecutive years.

But the good news did not buy political peace, as President Clinton and congressional Republicans continued to spar over how to write the current year’s budget. GOP negotiators approved what has become a cornerstone of their party’s budget plan--a bill to cut government spending across the board by 1%.

Under pressure from within their own ranks, the Republicans scaled back the cut from the 1.4% they had proposed earlier. But Clinton still denounced the move as “destructive.”

The surplus news was a reminder of one reason why the budget this year has been so hard to settle. After years of having the two political parties define their budget strategies in an era of deficits, their positions have been scrambled by the emergence of large and growing surpluses. On this new landscape, the GOP has repositioned itself as a guardian of Social Security, long a Democratic mainstay; Clinton and the Democrats, meanwhile, have become champions of a key tenet for fiscal conservatives--reducing the national debt.

The budget surplus for the 1999 fiscal year, which ended Oct. 1, is up from the $115 billion the White House had projected in September. The surplus for 1998 was $69.2 billion. The last time the government ran back-to-back surpluses was in 1956-57.

Clinton greeted the news by exercising bragging rights to an achievement few might have expected from a Democratic-led administration: By eliminating the deficit the last two years, Clinton said, the government could pay off $140 billion of the nation’s publicly held debt, which totals about $3.6 trillion.

“We have closed the book on deficits and opened the door on a new era of economic opportunity,” Clinton said, hailing the debt reduction as the largest in U.S. history.

But Republicans said none of this would have happened if a GOP-led Congress had not been around to rein in Democrats’ inclination to boost spending and raise taxes.

“This is what happens when Republicans take care of the government checkbook and hold the line against tax hikes and more spending,” House Ways and Means Committee Chairman Bill Archer (R-Texas) said.

The 1999 surplus was entirely attributable to excess revenues in the Social Security trust fund, which does not make it any easier for Clinton and Congress to resolve their budget differences. That is, in part, because Republicans have pledged--and Clinton has agreed--to end the practice of using Social Security revenues for anything but the retirement program.

That promise has helped Republicans undercut traditional Democratic claims to be the sole protectors of the retirement program. But sticking to that principle has made it much harder for Congress and Clinton to resolve their differences over the 13 appropriation bills needed to keep the government running. Seven of the bills have been signed; Clinton has vetoed two and threatened vetoes on four others.

On Wednesday, Republicans put the finishing touches on the final budget measure, a big bill to finance the departments of Labor, Education and Health and Human Services.

Clinton has threatened a veto because that bill would replace his multiyear initiative to hire 100,000 teachers with a grant that would give states more flexibility in spending the money.

The Republicans’ provision to cut 1% from every program in the 13 spending bills is part of a package of reductions designed to ensure that total government spending would not result in tapping Social Security. Other accounting devices were used to that end, including one that would force the National Institutes of Health and other health programs to defer spending $10 billion of their budgets until the last two days of the fiscal year.

Many Republicans have reservations about the proposed cut. Some are concerned about the impact on transportation programs. Defense hawks don’t want to trim the Pentagon budget (which Clinton signed into law earlier this week). Others don’t want the across-the-board cut to apply to a scheduled congressional pay raise.

But the whole discussion had a tentative tone Wednesday, as if no one expected the spending bill and the 1% cut to survive past Clinton’s near-certain veto.

“It’s all a blasted myth,” said Senate Appropriations Committee Chairman Ted Stevens (R-Alaska). “None of it’s going to become law.”