It's crunch time on the budget in Washington. With the Oct. 1 start of the new fiscal year rapidly approaching, lawmakers and President Clinton are under the gun to agree on new spending and tax levels. Expect to see plenty of political posturing and finger-pointing and lots of loose talk about the threat of another government shutdown, a la 1995-96.
But don't be fooled. With the election looming and surpluses flowing, Congress and the Clinton Administration are expected to do what comes most naturally to politicians--spend. And with the Congressional Budget Office pegging the non-Social Security budget surplus at $102 billion for the new fiscal year, there would seem to be plenty of room to open the spigots.
The problem: Whatever extra spending is agreed to today gets built into the budget. Why? Because program outlays typically increase every year. In fiscal 2000, which ends Sept. 30, the goverment looks set to exceed spending caps put in place in 1997 by $7.6 billion, setting the stage for more overspending in 2001. But not only is Congress breaking the caps--it's giving many government programs increases well above the rate of inflation. That upward spiral inevitably cuts into future surpluses and limits the money available to pay for needed reforms of Social Security and Medicare. And that's not even mentioning new spending called for by both Presidential candidates and George W. Bush's tax-cut proposals.
In the fiscal year beginning Oct. 1, experts expect the lame-duck President to get all of the $625 billion that he has requested--and more. That would put spending at least $50 billion over the caps.
How has the Republican majority been so neutralized in an election year like this one? Precisely because it is a crucial election year. GOP lawmakers--especially in the House, where the party only holds a slim majority--are anxious to get out on the campaign trail. An Aug. 28 Gallup Poll shows that the fight for Congress is a toss-up. So every day of campaigning counts, and every handout of money for pet projects is a surefire vote-getter. "There will be a lot of pork-barrel spending larded throughout the budget," predicts Robert L. Bixby, executive director of the Concord Coalition, a nonpartisan budget reform group.
GREEN LIGHT. Republicans also can't afford to reject spending in areas in which truly compassionate conservatives--as GOP members have now recast themselves--should be supportive. That means a green light for many things that polls indicate are popular with the public--such as the $3 billion Clinton is seeking to build schools and hire teachers. Above all else, no Republican wants a reenactment of Newt Gingrich's government shutdown debacle. "We'll do anything to prevent the disruption of government," says G. William Hoagland, GOP staff director of the Senate Budget Committee.
The result: sizable dents in projected surpluses, even though both sides insist they don't want that to happen. The CBO's non-Social Security surplus estimate of $2.17 trillion over 10 years assumes that discretionary spending will rise no faster than the rate of inflationary increases. That no longer seems likely. And while bigger spending hikes haven't hurt the budget so far because the strong economy is throwing off more tax revenues, any slowdown in growth increases the danger that the higher outlays will swallow up some of the surplus.
Extra spending isn't the only thing likely to eat into the surpluses. Any budget deal struck between Clinton and the Republican Congress is likely to include some tax cuts. One possibility: relief from the so-called marriage-tax penalty. Even though Clinton has already vetoed the $292 billion, 10-year marriage-tax cut sent to him by Congress, there is still a chance for a more limited compromise to be approved.
One sign of the dealmaking that's likely to come: House Speaker J. Dennis Hastert (R-Ill.) on Aug. 28 offered to approve a hike in the minimum wage if Clinton went along with a panoply of tax cuts for small businesses. Hastert said that, over a two-year period, he would allow a $1 hike in the minimum wage from its current level of $5.15 an hour. In return, business would get $76 billion in tax relief over the next decade, including a bigger break for deductions on entertainment and meals.
That's not to say the two sides will fully come together on the budget by the start of the fiscal year. There's just not enough time left to do that. Instead, they're likely to agree to a continuing resolution to keep the government running while they settle any outstanding issues.
To be sure, in a volatile election year, there's always a danger that anything could happen. "Anybody who tells you that they know exactly what is going to happen is really a liar," says Stephen Moore, president of the Club for Growth, a group that funds conservative candidates. But right now, the smart money is on compromise rather than confrontation, even if that poses some risks for the budget in the longer term.