Fiscal Pleasure, and Pain, for Democrats

Democrats in Congress have been having a field day with the recent bad news about the economy and the federal budget, eagerly blaming President Bush for blowing the once-burgeoning surplus and steering the economy into a ditch.

Democrats relished a double-barreled chance to attack Bush on Friday, when the government reported a surge in unemployment and administration officials conceded the budget was in worse shape than they had previously acknowledged.

But the roiling fiscal situation also poses risks for Democrats. They may seem to have the upper hand politically, but soon Democrats will confront tough decisions about their own competing commitments on issues ranging from education to Social Security.

“They are gleeful in the short run and confused about the long run,” said Robert D. Reischauer, head of the Urban Institute, a nonpartisan research organization. “If they beat the drum too loudly on protecting Social Security, they are going to be precluded from grabbing resources for [other] social programs.”

Democrats Divided Over Budget Strategy

The result could be a slam dunk for Bush, some Democrats fear: He winds up retaining his tax cut and gaining a substantial increase in defense spending.

As Congress this week starts to grapple with a host of spending decisions for the fiscal year that starts Oct. 1, the Democrats find themselves divided over their budget strategy.

Some think the ultimate response to the budget problems needs to be rolling back part of the Bush tax cut, which will reduce federal revenue by $1.35 trillion over 10 years. But the party’s leadership recoils from that idea as a form of political suicide.

On another front, some Democrats--after years of struggling to retire their party’s image as soft on defense--are loath to oppose the big budget increase Bush has proposed for the Pentagon. But others warn such an increase would force Democrats either to shortchange other cherished programs--such as education--or force them to breach the pledge not to tap Social Security surpluses.

Such fractures within the party have so far been obscured by agreement on a short-term strategy of blame shifting: Democratic leaders have put the onus on Bush and the Republicans to come up with revised fiscal proposals, stubbornly refusing to lay out a view of where the Democrats would like to go from here.

“It’s their budget, their tax cut,” Senate Majority Leader Tom Daschle (D-S.D.) said of Bush and the GOP. “I think it ought to be their solutions.”

But before the debate is over, many Democrats think that they too will have to make tough decisions about which of their commitments they will emphasize in a budget endgame that will go a long way toward defining the political dynamic of the crucial 2002 congressional elections.

Sen. Russell D. Feingold (D-Wis.) said: “The leadership is right to blame the president, but it’s not a long-term strategy. We’re going to have to come up with some solutions.”

Both parties have been forced to rethink their approach to the budget debate in the wake of the dramatically diminishing surplus, once projected to be $5.6 trillion over 10 years. The Congressional Budget Office recently projected that after setting aside Social Security’s roughly $160-billion surplus--which both parties have pledged to do--the government would be slightly in the red for the fiscal year that ends Sept. 30. The Bush administration had been projecting a more optimistic picture but conceded in private to GOP congressional leaders Friday that the CBO figures could be on target.

In response, Democrats now argue that Congress cannot afford all Bush has proposed--including his defense increase, new spending for education and a Medicare prescription drug benefit--without tapping the Social Security surplus. Bush has insisted it is possible to avoid that if Congress exercises restraint in other areas. That, however, could become an increasingly tough case to make.

But the new fiscal reality also puts Democrats in a tough spot. Their insistence on not using the Social Security surplus for other programs severely limits the amount of additional spending they can support--unless they back a tax hike.

Like it or not, Democrats will face a tricky question each and every time they cast a vote: How can they support measures to aid farmers or provide huge increases in defense and education if those bills can justifiably be viewed as a drain on the Social Security fund? In light of that, some Democrats are contemplating voting against every appropriation bill coming down the pike to underscore their commitment to safeguarding the Social Security fund.

“I’m in a box where I’m having to choose between two very bad alternatives,” said Sen. Joseph R. Biden Jr. (D-Del.). “Am I going to vote against everything from this point forward?”

Said a senior House Democratic strategist: “That is the question Democrats have to resolve: Are they willing to do zero, advocate nothing that costs additional money?”

So far, Democrats remain broadly supportive of strictly adhering to their Social Security promise. On policy grounds, they see this as a crucial time to prepare for the retirement of the baby boom generation. As a political matter, Democratic leaders see the Social Security issue as their ticket to recapturing control of the House in 2002; they figure they have powerful political ammunition to defeat Republicans if the GOP can be portrayed as an enemy of the nation’s most popular social program.

But not every Democrat is happy with this strategy. Rep. Bob Filner (D-San Diego) said many liberals are afraid the emphasis on Social Security protection will undercut the party’s traditional commitment to education and other social programs.

“We can’t believe that the Democratic Party seems to be falling into this: debating with the Republican Party about what to cut to save Social Security,” Filner said. “We’ll end up participating in cutting the budget for programs we support.”

To avoid that, members of the House Progressive Caucus, a small bastion of liberal Democrats, is planning to push proposals to roll back some of the tax cut for the richest taxpayers to provide more relief for the middle class or to fund favored social programs.

But Democratic leaders have been feverishly trying to squash any suggestions that their ultimate aim is to roll back the tax cut--knowing Bush and other Republicans would immediately respond that Democrats were trying to raise taxes in the middle of an economic downturn.

Indeed, in brief comments Friday on the sagging economy, Bush said, “There are some, it seems like, who are beginning to say maybe we ought to raise taxes.”

Bush did not say whom he meant, but Daschle has been determined to distance the Democrats from any tax increase. “That is off the table. It is a divisive issue here in Congress that would lead us nowhere.”

Daschle is well aware that 12 Senate Democrats supported the final version of the tax cut. One of them, Zell Miller of Georgia, recently complained bluntly about the continuing criticism party leaders direct at the measure, noting that such comments undercut the Democrats who backed it.

Democrats also are divided over Bush’s push to increase defense spending. Some fear the proposed $18.4-billion hike in the 2002 fiscal year--even if it could be squeezed into the budget--would sop up the resources needed for other proposals, such as public schools, a Medicare prescription drug benefit or farm subsidies.

“From where does the money for education come if we use up every dollar of non-Social Security surplus for defense?” asked Daschle.

Vulnerable Democrats Likely to Back Defense

Republicans figure they will have enough votes in Congress to pass most of what Bush wants, in part because many of the most vulnerable Senate Democrats up for reelection in 2002 hail from states with a heavy military presence. Two of them--Sen. Mary Landrieu of Louisiana and Jean Carnahan of Missouri--even sponsored an unsuccessful amendment earlier this year to boost military spending by about $100 billion over 10 years.

“On the defense budget issue, Democrats have been running scared since the beginning of the year,” said John Isaacs, president of the Council for a Livable World, an arms-control advocacy group.

Bush’s allies on this issue include no less powerful a figure than Sen. Daniel K. Inouye (D-Hawaii), chairman of the Appropriations subcommittee on defense, who said recently he would support the president’s full Pentagon budget--even if it meant using the Social Security surplus to pay for it.

“I, for one, believe it is essential that we provide the resources necessary for defense,” Inouye said.

Inouye’s comments presage a source of tension among Democrats in other debates to come: Members of the powerful House and Senate appropriations committees, who will be at the center of the budget debate, are especially wedded to spending for the programs they oversee. Some may find those claims more compelling than the sanctity of the Social Security surplus.