For Domestic Programs, the Bucks Stop Here

Bill Clinton may have declared in 1995 that the era of Big Government was over, but Congress didn't take the hint. Over the next six years, lawmakers increased spending on domestic discretionary programs--from roads to police to schools--by 28%, or nearly twice the rate of inflation.

That spending spree is about to come to a screeching halt. The federal deficit, now at $159 billion, could top $200 billion in the fiscal year that began Oct. 1. So to free up money in a $2 trillion budget for its top priorities--a military buildup, homeland security, and tax cuts--the Bush Administration and the new Republican majority on Capitol Hill are mapping out an aggressive strategy to squeeze domestic programs. "This year, the President was the only stopper against excess spending," says White House budget director Mitch Daniels. "Now, he has more allies."

The result will be something that was unnecessary during the boom years of the late '90s: spending freezes or cuts for some programs, such as winter heating subsidies for low-income Americans, and smaller increases than promised for others, such as education. What's more, the Administration said on Nov. 14 that it will proceed with plans to contract out up to 850,000 federal jobs to the private sector, from maintenance to computer services.

Presidents since Richard Nixon have talked of downsizing the bureaucracy and reining in spending. But Bush is likely to succeed where others fell short. Riding high in the polls and basking in the glow of the election, the President has extraordinary leverage on Capitol Hill. Moreover, he can use the war on terrorism to justify budgetary sacrifice, as he did on Nov. 29, when he denied federal workers in high-cost communities an 18.6% "locality" pay raise. "He's become the grand budgetary colossus," says Robert L. Bixby, executive director of the Concord Coalition, a deficit-watchdog group.

Certainly he's wasting no time getting out the austerity message. Budget director Daniels in late November began a round of meetings with Cabinet officials to discuss the President's order to keep each agency's total budget at current levels. Cuts must offset any added nonsecurity spending, they are being told.

While domestic spending takes a hit, the Pentagon could see its $379 billion budget soar to more than $400 billion next year if the U.S. goes to war with Iraq. As a result, overall federal spending will continue to grow, even as social programs shrink.

To centralize control over spending, House Republican leaders are taking steps to reduce the independence of appropriations subcommittee chairmen, who generally are fierce defenders of their fiefdoms. For the first time, the top House appropriators will be chosen by their leaders, not by seniority. And panel bosses may be axed if they send bills to the floor without getting approval from above. "That's a clear signal that they can't freelance anymore," says John J. Pitney Jr., a political scientist at Claremont McKenna College.

However, the narrowly divided--and less conservative--Senate will be harder to control. A key concern is new Appropriations Committee Chairman Ted Stevens (R-Alaska), who tops the Senate's list of pork-barrel spenders, according to the conservative Citizens Against Government Waste. Administration officials realize there will be tension with the Senate in '03. "The only prediction I feel safe in making is that we'll have difficulties," says Daniels. But the leadership will keep pressure on. "They're going to whine and moan and try to make their case [for additional spending]," predicts one GOP Hill adviser. "But they're also of the view that they want to contribute to the success of the President and the Republican majority."

The White House is eager to test its clout. One possibility: a vote shortly after the new Congress convenes, on Jan. 7, to freeze most 2003 spending at 2002 levels. That, says a Bush strategist, "will set the tone."

The President signaled the tough new line in August, when he refused to spend $5.1 billion of emergency appropriations approved by lawmakers for programs including nuclear plant safety and veterans' health care. Bigger cuts are certain in '03. Congress is unlikely to fully fund the sweeping reforms designed to improve public schools. And the White House may withhold new funding that the strapped Securities & Exchange Commission needs to hire additional lawyers and accountants and increase pay.

The biggest potential budget-buster is the 2003 Transportation Act. In the past, the highway bill has been a bipartisan porkfest for lawmakers who want to bring money for roads, bridges, and public transit to their districts. Bush is caught between his hard line on spending and advisers trying to improve his standing with unions, who see the bill as a job-creator. In the end, Congress-watchers predict Bush will allow modest hikes.

Democrats are hoping to generate a backlash against Bush for blocking funds for programs that aid the poor, the elderly, and veterans. Critics say the Bush budget strategy is little more than political theater designed to distract attention from tax cuts that will drain trillions from the treasury. "It's largely a snare and a delusion to mask their fiscal irresponsibility," fumes outgoing Senate Budget Committee Chairman Kent Conrad (D-N.D). "None of this adds up."

As passionate as Conrad may be, he will soon be an ex-chairman with little ability to stop Bush's budget brinkmanship. And while the federal deficit seems likely to balloon, that's something this President can live with. He has other, higher priorities: winning the war on terrorism and putting domestic programs on an extended diet.

By Richard S. Dunham in Washington

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