Budget surplus vanishing

Next week, 90 million Americans will receive letters from the US Treasury telling them when to expect their tax rebates.

What the letters won't explain is that this first installment of the Bush tax cut will cost $74 billion this fiscal year. That amount - coupled with payments to the Social Security and Medicare trust funds and other mandated obligations - brings the expected $275 billion federal surplus down to $6 billion.

Well, you say, $6 billion is $6 billion. What's the big deal?

For one, that probably won't be enough for President Bush's top priority - a new education bill. Lawmakers are expected to add billions in new spending when they hash out the final version.

Then, lawmakers in both parties are charging ahead with spending requests - for bridges, exit ramps, and other projects in their districts - despite Mr. Bush's threat to veto spending bills that exceed his budget.

Suddenly, $6 billion seems a paltry sum to many lawmakers.

And as some begin to chafe at the financial strictures, the possibility of a major showdown with the president - or, possibly, a raid on the Medicare and Social Security set-asides - seems increasingly likely.

"We're in trouble - there is no other way to couch the bad fiscal news," says Sen. Kent Conrad (D) of North Dakota, chairman of the Senate Budget Committee.

Last week, the Bush administration asked for an additional $18.4 billion for defense spending. That's just to maintain what's already in place. The big spending requests for a promised strategic review of the military are still months away.

Meanwhile, Senate Democrats are fighting to add at least $22 billion to next year's education spending, along with $181 billion for children with disabilities over the next 10 years. Majority leader Tom Daschle is threatening to hold up reauthorization of the 1965 Elementary and Secondary Education Act until it's clear that these increases will make it into this year's appropriations.

But the biggest threat to budget discipline is the momentum for more spending and more tax cuts - and the habit of creative bookkeeping to pay for them, experts say. And in a closely divided Congress, where every vote counts, it's even harder to say no.

"Trying to stop spending this year is like standing in front of a speeding locomotive," says Allen Schick, an expert on the budgetary process at the University of Maryland. "First, there's the momentum from last year [when President Clinton and a Republican Congress exceeded budget spending caps by $94 billion]. And a tightly divided Congress makes it difficult for the president to hold his troops in line," he adds.

The big apple provision

Take apples. Last week, the House delayed the agriculture appropriations bill for more than a week over a dispute about $150 million in "emergency" payments to apple growers for last year's damaged crop.

Usually, such a request for special payments starts with the Agriculture Committee. But big apple-producing states aren't well represented there. Nor could apple boosters come up with an offset that would allow the agriculture spending bill to stay within its $15.5 billion budget allocation.

So New York and Washington lawmakers designated payments to apple growers as an "emergency," thus avoiding spending caps.

In the end, the White House and the GOP leadership balked at the use of emergency designations to get around budget restrictions. But the $150 million made it into the agriculture-spending bill, anyway. House Budget Chairman Jim Nussle (R) of Iowa agreed to adjust the budget limits of other subcommittees (except Defense) to cover the money overspent on apples.

The incident left many Democrats puzzled as to why apples rated such special treatment, when their own amendments for food safety and nutrition programs were ruled out on the ground that they busted budget caps.

"They could have done this for a number of amendments, but they only chose one," says Rep. Marcy Kaptur, ranking Democrat on the Agriculture Appropriations Subcommittee.

On another front, administration officials are already complaining about more than 900 member projects in the $14.9 billion transportation spending bill (a street-car project in New Orleans; a vintage-car system in Little Rock, Ark., with a half-mile extension to the William Jefferson Clinton Presidential Library site; a new rail line to ease traffic congestion on New England's Route 3).

On the Senate side, the new Appropriations chairman, Sen. Robert Byrd (D) of West Virginia, wants to add $2.7 billion to water and energy programs and $700 million to the agriculture budget.

Effect of a narrow majority

The administration may find it difficult to fend off many of these requests, since the narrow majorities in Congress give lawmakers much more bargaining power.

"The big myth has been that with narrow majorities, the president will be able to hold back pork spending, but historically you get more 'pork' than less with narrow margins," says Stanley Collender, senior vice president for Fleishman Hillard, a federal budget consulting group.

"Any member can bolt and create a revolution. If they want money for their district, you have to give it to them."

At the same time, Republicans worry that the president's own spending plans could break the budget and leave them vulnerable to voters in 2002. Unlike Republicans and Democrats in Congress, Bush has never argued that the Medicare surplus should be as walled off as the Social Security surplus.

"It is our belief that the strategy of the Democrats is to try to spend Congress into the trust funds, so that they can turn around and spin it as the fault of tax reduction," says House majority leader Dick Armey. "There will be no spending, nor any further tax reductions that would intrude against these two firewalls."

Upcoming midterm elections

After all the horse-trading and arm-twisting, this year's budget battle is sure to be grist for Campaign 2002.

"Congress will probably exceed their budget limits, and the only question is who is going to get blamed. Senate Democrats will probably hold the Defense budget for the last - as the one where Medicare is dipped into," says Bill Frenzel, a guest scholar at the Brookings Institution here and a former ranking member of the House Budget Committee. "It is where the president is most vulnerable."

However, there is one expense that Democrats say should come out of the budget: the $33.9 million it will cost to send taxpayers notice next week that their checks are in the mail.

(c) Copyright 2001. The Christian Science Monitor