Despite a projected $3.1 trillion non-Social Security surplus over the next decade, the White House and Congress will have to face some tough choices. If Bush is going to fund his 10-year Texas-size tax cut, he must hold down increases in spending on programs other than Social Security and Medicare to levels not seen in years.
To reconcile the budget with lower tax revenues, Budget Director Mitchell E. Daniels Jr. startled Cabinet chiefs by mandating that discretionary spending grow just 4% in fiscal 2002--much lower than the 6% it has averaged in recent years. But Bush will have to do even more than that to avoid stumbling back into deficits. He'll propose reining in spending growth for everything from Air Force fighters to upkeep for national parks, to a mere 3% over the next decade.
Bush's belt-tightening isn't going over very well in Congress. Many lawmakers clearly view his $2 trillion budget as overly stringent. Both Democrats and Republicans want additional funding for the Pentagon. They consider Bush's just-announced $1.4 billion military pay raise as simply an appetizer. Both parties want more money for health care. And Bush himself will propose a stunning 11.5% increase in education spending. Even one House GOP leader doubts Bush's budget will survive Capitol Hill. Says Representative Tom Davis (R-Va.): "Every President's budget is dead on arrival. The President sends what he sends. We pass what we pass."
To make his numbers add up, Bush is resorting to some rather fuzzy math. Although the economy is slowing to near-recession levels, Bush's budget still assumes strong revenue growth for the coming year. But when the subject is tax cuts, he paints the economy in dire terms. If Bush is right about a downturn, the revenue-gusher his budget assumes will likely be off the mark.
Tax cuts or no, Bush will have a tough time resisting the urge to spend. The Pentagon, for instance, will need huge hikes--up to $50 billion a year, or more than 10%--just to maintain and modernize current forces, according to the Congressional Budget Office. On top of that, Bush has vowed to build a costly new missile-defense system. "There is a bipartisan desire to spend more on defense," says Prudential Securities Inc. analyst Charles Gabriel.
If the Pentagon gets 10% more, and the entire discretionary budget is held to just a 3% increase, the rest of government--including law enforcement, environmental protection, veterans' benefits, and the like--would face actual cuts. But with huge surpluses around the corner, few politicians will be likely to go along with such reductions. In fiscal year 2000, non-Social Security spending jumped by 7%. This year, it rose 6%. Bush will try to hold that increase down for next year. But he's still expected to ask for $663 billion, or about 4% more than in fiscal 2001. If Congress continued to increase the budget by 4% over the next decade, more than $350 billion would be sliced off the surplus. The inevitable result: Bush will have to compromise on his tax cuts.
Bush wouldn't be the first President who failed to deliver on promises to hold down spending. Ronald Reagan held domestic spending in check, all right, but it was more than offset by huge increases in the Pentagon budget. Bill Clinton proposed jumps in spending in the short run even as he promised to hold long-term outlays in check. As the years went on, both went up. He also proposed increases in his favorite "public investment" programs and offered to pay for them by slashing GOP priorities. In the end, Congress would spend more for both.EFFICIENCY SAVINGS. To make the numbers in his budget add up, Bush will borrow both elements of the Clinton strategy. He'll also adopt a favorite Reagan and Clinton tactic: management reforms. Bush will propose saving $200 billion through unspecified improvements in government efficiency. Are such savings possible? Sure. Will he get them? Don't bet on it.
In Texas, Bush was no beady-eyed budget hawk. Indeed, spending grew faster under his Administration than under his Democratic predecessor, Governor Ann Richards. Now, he faces a Congress that will be even more aggressive about protecting its favorite spending programs than the Texas legislature ever was.
In the end, Bush's numbers cannot work. His tax cut will be scaled back, and spending will increase faster than he wants. Despite Bush's claims about creating a new Washington, we are about to see the kickoff of the same budget games we've been watching for years. By Howard Gleckman and Richard S. Dunham
Gleckman covers fiscal policy and Dunham covers the White House from Washington.