The Neatest Thing about That $87 Billion

Bush and congressional leaders plan to treat the Iraq spending as if it were off-budget, pretending they're not creating red ink

By Howard Gleckman

Time to follow Alice for another quick trip down Washington's rabbit hole. Just take a look at what's about to happen with President Bush's request for $87 billion to continue U.S. military operations and reconstruction in Iraq and Afghanistan.

Bush will get the money from Congress, all right. But that's where things will begin to get strange. The President and congressional leaders are going to try to make $87 billion in federal spending disappear. How? By treating it as if it were off-budget spending.

Here's how: For fiscal year 2004, which begins on Oct. 1, Bush has insisted that Congress hold discretionary spending -- that is, all expenses except for programs such as Social Security, Medicare, Medicaid, and interest on the debt -- to $784.7 billion, and not a penny more. From now until Thanksgiving, the White House and Congress will do battle over every cent.


  Lawmakers will try to squeeze as much extra spending as possible into that target. And the President will insist that exceeding his cap by just one dollar will jeopardize the nation's economic future. Said the Office of Management & Budget on Sept. 4: "Only within such a fiscal environment can we encourage increased economic growth and a return to a balanced budget." Expect veto threats and perhaps even veiled warnings of a government shutdown if that $784.7 billion spending cap isn't met.

There's just one problem. While Bush and Congress are fighting over every dollar, they're going to pretend the $87 billion in Iraq money doesn't count as part of the discretionary budget ceiling, even though every thing else the Pentagon does is included.

This is an accounting gimmick that would shame even Enron. "We will hold down spending," Bush and GOP leaders on Capitol Hill will say. But next to that boast will be a little imaginary asterisk that says, "For everything, that is, but Social Security, Medicare, Medicaid, a fistful of trust funds, and the war in Iraq." In truth, the government will spend more than $1.3 trillion next year -- close to twice the discretionay-spending target -- on stuff that doesn't count in Washington's debates over fiscal responsibility.


  Watch for Bush to claim by the end the year that he held discretionary outlays to a 4% hike, even though spending will go up by close to 15%. The White House and Congress will just pretend it didn't happen.

And how will Uncle Sam pay for all these extra burdens? With real money that Treasury will have to borrow, creating real debt that your kids will be paying off for the rest of their lives.

Senior Correspondent Gleckman covers fiscal policy for BusinessWeek in Washington

Edited by Douglas Harbrecht

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