The Washington Times
The conservative case against the budget agreement reached by the White House and Congress goes like this: Because of political cowardice, congressional Republicans abandoned the budget caps they had sworn to uphold two years ago in the balanced budget deal they reached with the White House. Although they claim to have protected the Social Security Trust Fund, they have, in fact, dipped into the money. And at the end of the day, the Republican Congress gave President Clinton more money, even, than he had asked for in his budget submission in January 1999.
To all of which, the correct response is, “Yes, but.” And the “but,” not the “yes,” is the big story of this year’s budget battle. As a result of the politics of the showdown this year, the fiscal landscape of the United States has changed, certainly for the better and possibly for a good long while – as long as the Social Security system is taking in more in taxes than it is paying out in benefits.
It is true that outlays for Fiscal 2000 for all non-mandatory federal spending are about the same as the president proposed in January. But there are a couple of important differences between what the president proposed and what he ended up with.
In the first place, the president’s January budget included a number of revenue offsets for higher spending levels than allowed under the budget caps. Mr. Clinton met the caps by budgeting some $18 billion in offsets. Their biggest component was a tobacco tax increase that never materialized. Republicans in the House, in fact, made a show of putting Mr. Clinton’s package of revenue enhancers to a vote; it failed overwhelmingly. So while spending in the final agreement is about what Mr. Clinton proposed, the way in which it is being paid for is different.
In addition, the comparison between Mr. Clinton’s budget and the actual outcome is misleading on apples-to-oranges grounds. By CBO’s reckoning, Mr. Clinton was actually proposing discretionary outlays of some $605 billion for 2000.
The question boils down to this: Is it better to have a balanced budget while spending $592 billion and maintaining existing tax levels or to have one while spending $605 billion and imposing de facto permanent tax increases of $10 billion the first year?
What made it possible to keep the spending level at $592 billion and drop the tax increases was a strong economy. And thereon hangs the second “but.” In August 1998, the Congressional Budget Office (CBO) was forecasting a surplus for 2000 of $79 billion. The entirety of that amount, plus another $46 billion, would be a result of the Social Security surplus (which the government has routinely “raided” in calculating the baseline federal deficit).
By January, the fiscal picture had improved significantly. CBO was forecasting a $131 billion baseline surplus. But the government was expecting to take in $138 billion more in Social Security than it paid out. So there would still be a “raid” of $7 billion.
But by August, CBO was forecasting a surplus of $161 billion. And for the first time, the Social Security surplus, now estimated at $147 billion, would be smaller than the overall surplus – by $14 billion.
Now, Congress and the administration quickly agreed to spend that $14 billion. But Congress also erected a new political fence around the Social Security surplus, declaring it off limits for spending. As recently as the April 1999 CBO estimate of the effect of the president’s budget, the administration was proposing to tap some $20 billion of the Social Security surplus to achieve balance.
In the event that this hands-off approach is so politically powerful that it can fend off politicians’ natural urges to spend the money, the result over time would be truly remarkable. It would mean hands off $155 billion of the projected budget surplus of 2001, $163 billion in 2002, $172 billion in 2003. These sums would go directly toward reduction of national debt. Debt held by the public would decrease from $3.7 trillion at the end of 1998 to $865 billion at the end of 2009 – or from 44.3 percent of GDP to 6.4 percent of GDP. If there is a “fudge factor” in the calculations this year, it is only at the margin of $147 billion that is not being spent. And the reason for the fudging is that the principle of not spending this money has been so firmly established.
This is a very big deal. One of the axioms of conservative thinking is that if you give government the money, government will spend the money. This year, for the first time, that’s not happening.