Purse Strings Looser in New Climate

Let the spending spree begin.

Congress received President Bush’s budget Monday in a political and fiscal climate that has precious few incentives for lawmakers to exercise fiscal discipline.

It is an election year. War and recession have loosened purse strings. And even Bush is saying other matters now are more important than keeping the government in the black.

That’s a big departure from the trend of the last two decades. Since the mid-1980s, federal budget policy has been guided by the goals of reducing the deficit and balancing the budget, even if progress toward those priorities was not always steady.

There are still some in Congress who are trying to cling to the mantra of fiscal restraint, including House Republicans who are urging their leaders to pass a balanced budget this year, even as Bush has proposed one with an $80-billion deficit. Some of these conservatives fear that Bush’s proposed 8% increase in discretionary programs may be an invitation to spend more, not less.

“This is the floor, not the ceiling, for where spending is heading in 2002,” said Stephen Moore, head of the conservative political group Club for Growth.

Indeed, Congress is likely to give Bush the big spending increases he seeks for defense and homeland security. Meanwhile, many of the spending reductions he proposes are in areas Congress is unlikely to cut, such as highway funding, environmental programs and home-state projects of key lawmakers. And if Congress overspends Bush’s budget, it may be harder for Bush to hold the line.

“He is saying, in effect, that deficits don’t matter for everything I want to do, but they matter for everything you want to do,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan budget analysis group. “It takes some of the moral authority away from the case for fiscal discipline.”

Deficit foes may win in one area: Bush’s proposal to pass another round of tax cuts to stimulate the economy is expected to die soon. Momentum behind congressional action has slowed to a crawl as the economy has shown signs of improvement and the Senate has remained deadlocked over the issue for months. Senate Majority Leader Tom Daschle (D-S.D.) has scheduled a showdown vote Wednesday and is likely to pull the bill if, as expected, the impasse is not broken.

Bush’s budget request marks the formal beginning of Congress’ process for setting government tax and spending policy. The next step is for the House and Senate to pass a budget resolution setting broad tax and spending targets, which will guide Congress in writing detailed spending bills later this year.

Congressional Republicans hailed Bush’s budget, even though a sizable faction of House conservatives is uneasy with running the deficits it projects. Some are urging GOP leaders to write a budget resolution that is in balance--a feat they think can be accomplished if, as many expect, no economic stimulus legislation is enacted. Of the $80-billion deficit Bush projects for 2003, $77 billion is attributable to the stimulus bill.

The idea of pushing a balanced GOP budget was discussed late last week at a party retreat of House Republicans, and it has the backing of the powerful House majority whip, Tom DeLay (R-Texas). But House Budget Committee Chairman Jim Nussle (R-Iowa) said it would be hard to do that and still accommodate Bush’s priorities in defense, homeland security and economic policy.

White House budget director Mitchell E. Daniels Jr. argued that the new era of deficits would be brief and that surpluses would return quickly when the economy rebounds.

Asked about House Republican pressure to produce a balanced budget, Daniels said: “We appreciate their concern that we get back to balance as soon as possible. With economic growth, that will happen.”

Democrats are trying to seize the mantle of fiscal responsibility by criticizing Bush for ushering in a new round of budget deficits.

“We don’t want to put this country back in the mode of unending deficits year after year,” said Rep. John M. Spratt Jr. (D-S.C.), senior Democrat on the House Budget Committee.

But Democrats are in a political box when it comes to proposing a way to return to surpluses. Most are unlikely to fight big budget increases for defense and homeland security. But they also want to add back money Bush proposed cutting in popular domestic programs, especially in an election year in which control of Congress is at stake. But most Democrats do not want to push for a rollback of last year’s tax cut to reduce the deficit.

Pressures to increase spending also are exacerbated because, for the first time in decades, Congress is operating without budget-law curbs that have helped limit spending in the past.

In the mid-1980s, Congress was restrained to some extent by a law that forced automatic budget cuts if deficits exceeded specified targets. New limits were imposed by a 1990 budget law. Especially important was a “pay-as-you-go” requirement that any bill that reduced revenue or increased entitlement spending had to be coupled with offsetting deficit reduction measures.

Those strictures were extended when Congress passed the 1997 budget-balancing law. And as the deficit vanished even more quickly than expected, members of both parties agreed to a new, even more stringent fiscal limit: that the budget would be balanced without using Social Security surpluses.

All that is gone this year. The consensus behind keeping Social Security in a “lockbox” shattered under the weight of war and recession. And the pay-as-you-go law and budget limits expire this year.

That means a Bush veto may be the last tool of fiscal discipline left in Washington. But it’s not clear how effective his veto threat would be.

“In recent weeks, the White House has seemingly flaunted its deficits, virtually taking pride in the fact that it was willing to throw aside fiscal discipline because events warranted,” said Stanley Collender, a budget expert at the public relations firm of Fleishman-Hillard. “If a president as popular as Bush is not worrying about long-term deficits this year, it is hard to see too many people on Capitol Hill fretting much either.”

That’s particularly worrisome to fiscal conservatives who were none too happy that Bush allowed big spending hikes in last year’s budget as well.

“If these spending increases continue, Bush is in danger of being remembered as a big-spending president rather than a tax-cutting president,” said Chris Edwards, director of fiscal policy at the Cato Institute, a libertarian research group.