The budget battle of 1999, hard to believe but true, has featured GOP cunning.

View this article at The Weekly Standard

REPUBLICANS BOTH INSIDE and outside Congress have been pleasantly surprised by how well they are doing politically in this year’s budget fight with President Clinton. Ever since Clinton squashed the Republican Congress over the government shutdown in 1995-96, the autumnal rites of appropriation have been a time of dread for the GOP, an exercise in wondering who among them will be a human sacrifice come the next election as a result of drawing the wrath of the Democratic administration.

This time, simply put, they are not getting killed. In fact, thanks to their tireless reiteration of their unifying theme — namely, that they are going to protect every last dime of Social Security from marauding Democrats — and thanks to the money the GOP is spending on advertising in select congressional districts repeating the point, poll numbers show the Republican message taking hold. It looks like Republicans have at last found an incantation with the same black magic power as the Democrats’ “Medicare, Medicaid, education, and the environment.”

Now, there are those who might say that the real secret of the GOP’s success, such as it is, has been timely surrender, appeasement, and subterfuge: that Republicans have whole-heartedly agreed to substantial increases in government spending. The spending caps theoretically imposed by the balanced budget agreement have in effect been blown to smithereens, and the appropriations bills themselves are, in the aggregate, full of budgetary gimmickry and self-aggrandizing assumptioneering. This, snort some, is what a Republican Congress does? Crank up spending and cook the books to hide it?

Well, up to a point. Those who see a smaller, more limited federal government as the sole test of conservative success will rightly be disappointed. At the end of the appropriations process — which is to say, before final negotiations with the White House — domestic discretionary outlays were scheduled to grow by 6 percent. The increase in outlays will surely outpace the growth of the economy in 2000. In absolute and relative terms, government is not shrinking but growing.

But this raises the question: By how much? And compared with what? In judging the Republican performance, it’s only fair to take account of political reality — in particular, the terra incognita of budgeting in an era of surplus.

A better term for Bill Clinton’s “Third Way” governing philosophy might be “balanced-budget liberalism.” For years, Republicans ran against the federal budget deficit, while Democrats only paid lip service to the concept (though they were always prepared to raise taxes in the name of deficit reduction). With their new majority after the 1994 elections, Republicans felt obliged to attack the deficit head-on. Politically, they ran into the Clintonian buzzsaw. But in the end, thanks in no small measure to a surging economy, Clinton was happy to grant Republicans what they had always claimed was their fondest wish: a balanced federal budget.

One should, of course, be careful what one wishes for, lest one get it. Before Republicans saw it, Clinton understood the political implications of a world of budget surpluses. If your main argument against federal spending is “the deficit,” then surpluses translate into more spending. The GOP leadership on Capitol Hill disagreed. Many of them still wanted to cut spending or at least restrain increases. But for the first time in their political lives, the budget deficit was no longer at hand as an easy argument against spending. And Clinton would not go along with a tax cut acceptable to Republicans, so no budget restraint would be imposed by depriving the government of tax revenue.

This is the box Republicans found themselves in at the beginning of the 1999 budget season, with the additional headache, after their 1998 election losses, of only a whisker-thin majority in the House. What’s more, impeachment-related political tumult had claimed first the Gingrich speakership and then Bob Livingston’s, resulting in the elevation of the amiable but untested Dennis Hastert of Illinois. This looked for all the world like an environment in which Clinton could fragment the House Republicans and dictate the spending levels he wanted, up to the limits of the budget surplus.

Indeed, this was the calculation the House leadership made at first. They were inclined to abandon the budget caps early and make an expensive peace with the White House, thereby avoiding the nightmare scenario of another government shutdown for which they would be blamed — and the end of their majority in 2000. But there was serious resistance in the ranks to the idea of popping the caps. So they hung on and looked for some other survival kit, and found an unlikely one.

They decided to make Social Security their friend. For years, the fact that government took in more in Social Security taxes than it paid in benefits, $ 99 billion in 1998, was irrelevant to the big picture on the deficit. In other words, government “spent” the Social Security “surplus” — that is, the deficit for running the rest of the government, apart from Social Security, would have been higher by the amount of the Social Security surplus. No one seriously objected to this “raid” on the “Social Security trust fund.” These are arbitrary accounting distinctions.

Then, in a series of head-scratching staff meetings devoted to the question of how not to get killed, Republicans finally hit paydirt — a line they could articulate simply and clearly, with potential for public resonance, and around which they could keep their slender majority united, against all odds. It was “Stop the Raid” on Social Security. At a stroke, they were able to declare some $ 147 billion of the federal budget surplus for 2000 off limits to new spending. And they were able to hold that line.

In accounting reality, this Social Security surplus figure is no less arbitrary than the budget caps supposedly still in force. But in the real world of politics, the fact is that budget caps were too abstract to hold Republicans together. Social Security is real.

Clinton’s rhetorical case against a tax cut hinged on protecting Social Security, for example.  Without necessarily setting out to do so, the GOP leadership essentially created a very useful artificial deficit, the size of the Social Security surplus. This “deficit” now serves as a restraint on federal spending — and will continue to do so. The Social Security surplus is estimated at about $ 155 billion in fiscal 2001 and $ 164 billion the year after. If Republicans win this point, it’s likely to work for them in future budget rounds.

The story of the fiscal 2000 budget, then, is not the story of gimmicks and gewgaws. That’s the story of the budget every year. The story is how a perilously thin and nervous GOP majority under an untested leader managed to change the subject in such a way as to forestall scores of billions in additional government spending at a time when the government had the money. Dennis Hastert turns out to be the most underestimated politician in Washington since Bill Clinton in January 1995.