Domestic programs hit political wall

A new budget year started in Washington a week ago. But Congress has not passed any of the 13 regular appropriations bills for fiscal 2003.

At some point, the legislators will get around to approving a "continuing resolution" to provide funds for the work of government.

What has happened is steeped in politics. With a close congressional election five weeks away, the members of Congress are busy electioneering – mostly on Capitol Hill.

"Neither party wants to do anything that can give an advantage to the other party," says Robert Reischauer, president of the Urban Institute and a budget expert. "The [political] stakes are extremely high."

The Republican leadership of the House, for instance, has not called a debate on any of the appropriations bills, apparently because that would require spelling out which spending programs would be restrained or cut to make way for extra spending on defense and homeland security.

That could be politically difficult for Republican members seeking reelection in closely contested districts. So Republicans are split on what to do about the bills.

Under President Bush's budget requests, spending on low-income programs this fiscal year would face a 2.3 percent, or $2.2 billion, reduction, says the Center on Budget and Policy Priorities (CBPP), a Washington think tank. Transportation trust-fund programs, including highway funding, would be cut 21.2 percent, or $8.9 billion.

The budget proposed real cuts in 19 programs. A sample includes college preparation for low-income secondary students, job training, community-service employment for older Americans, children's and family-services programs (including Head Start), homeless-assistance grants, and housing for the low-income elderly and disabled.

"As the nation addresses its defense, homeland, and economic priorities ... growth in the rest of government must be restrained to prevent an explosion in spending," Mr. Bush's budget states.

But not much is heard nowadays about a necessity to make budget sacrifices to help pay for the war on terrorism.

That's because Democratic politicians will not hesitate to berate their Republican opponents for cutting programs benefiting the poor and middle class while cutting taxes for the well-to-do.

"A call for shared sacrifice would almost inevitably lead to some discussion of reconsidering various elements of last year's tax cut that are not yet in effect," notes the CBPP.

Most of the leftover benefits of the 2001 tax-cut bill go to the nation's most affluent families.

Nor does the White House say much about the impact a war in Iraq would have on the budget.

Even without war, deficits are likely to continue for at least five years, says Charles Schultze, chief economist to President Carter.

Congress has the choice of letting deficits grow, raising taxes (or reducing old tax cuts), or shrinking spending.

"No politician wants to confront that difficult set of alternatives," says Mr. Reischauer, a former director of the Congressional Budget Office. "But you can't have it all – guns, butter, and low taxes."

Earlier this year, the House approved a budget plan limiting funding for annually appropriated programs to $759 billion this fiscal year. At the committee level, the Senate has agreed on a $768 billion level.

Both the House and the Senate apparently agree with the president on providing an extra $42 billion this year for defense, homeland security, and international affairs.

Where the two Houses disagree is on domestic spending outside homeland security. The Democratic-controlled Senate adds a tiny (when adjusted for inflation) $1 billion for domestic programs in 2003. The Republican-controlled House would cut the programs by $9 billion, according to a CBPP analysis.

In this area, neither number represents a "spending explosion."

If expenditures on defense and homeland security were to rise at the same pace beyond fiscal 2003, there would be rapid growth, if not an explosion, in federal spending. Most observers, however, see little necessity for further big boosts in defense or security beyond 2003.

At present, the talk in Congress is that adjournment will occur Oct. 18 to accommodate the election.

It's not yet clear whether a continuing resolution will include measures to beef up spending for the Coast Guard, the FBI, or other homeland-security areas. Nor is it certain any extra funding will go to the Internal Revenue Service – money that might come back quickly in extra federal revenues.

Also on the table are bills to reform pension and bankruptcy laws and to lift Medicare payments.

Reischauer sees less than a 50-50 chance of anything getting through the political roadblocks. "But lightning can strike," he says.

Over the long term, budget experts are concerned that the fiscal-discipline mechanisms that were so useful in stanching the red ink in the 1990s expired last week.

If these are abandoned, it guarantees growing deficits, says Leon Panetta, White House chief of staff for President Clinton. "It's frightening for the future."