More Spending, New Tax Cuts Backed

Turning Tough Talk on Deficits Into Action Is Hard, Experts Say

Author: Jonathan Weisman

Published: March 18, 2004

Surging federal deficits have dominated the debate over the 2005 budget winding through Congress. But in the span of five hours last week, the Senate added $7 billion for the Pentagon, boosted spending on veterans health care, forest management and medical research, and stripped out a relatively modest $3.4 billion cut in entitlement spending over five years.

Then, yesterday, the House Budget Committee adopted a budget plan that takes a tough line on spending, but more than offsets those spending cuts with $150 billion in additional tax cuts over the next five years.

So far, budget analysts say, the effort to craft a budget resolution is demonstrating how hard it is to translate tough talk into action -- especially in an election year. "It's a lot harder than it looks," said Robert D. Reischauer, a former director of the Congressional Budget Office and now president of the Urban Institute.

The Senate made waves last week when a few Republicans joined Democrats to insist that any new tax cuts be offset by spending cuts or increases in other taxes. Only a 60-vote majority in the 100-seat Senate could waive that restriction.

Less noted before final passage of the Senate budget were the measures likely to increase the deficit, which is projected to reach $477 billion this year.

Senate Budget Committee Chairman Don Nickles (R-Okla.) had insisted that lawmakers tighten all areas of spending under Congress's discretion, including defense. But the Senate overwhelmingly rejected that notion, adding $7 billion in defense spending to comply with President Bush's request. Also added: $2 billion for the National Institutes of Health, $1.7 billion for emergency responders and port security, $343 million for forest restoration, $33 million for college tuition assistance, $101 million for veterans health research, and $5.6 billion for an expansion of health insurance for military reservists and National Guardsmen.

Most of those spending increases are to be paid for by unspecified cuts to general government funding or federal "allowances." But without specifics, Republican and Democratic Senate aides say those offsets will never happen. In all, a Senate GOP leadership aide said, as much as $15 billion was tacked on to the budget.

Democrats, with the help of eight Republicans, also stripped out language that would have eased passage of $3.4 billion in cuts in mandatory spending programs -- mainly Medicaid and the earned-income tax credit. They then added language to grease passage later this year of $2 billion in tax refunds for low-income workers with children.

"You've got to think of this as an evolutionary process," Reischauer cautioned. "We're not going to get significant reforms in an election year."

Early this month, House GOP moderates announced that they, too, would push to ensure that new tax cuts be offset by spending cuts or tax increases. "If these principles are adopted, taxpayers and markets will be assured the federal government will spend within its budget," Rep. Mark S. Kirk (R-Ill.) said.

By yesterday, the moderates had dropped the matter. Instead, the House Budget Committee approved along party lines legislation that would impose strict caps on federal spending but no restrictions at all on tax cuts. Rep. Ron Kind (D-Wis.) said committee Republicans pursued "a veiled, cynical attempt to pretend that you're being fiscally responsible without having to make tough choices."

Committee Chairman Jim Nussle (R-Iowa) retorted: "The real challenge to the deficit long-term is controlling the spending side."

As for the moderates, Kirk said with a shrug: "If you're looking for a story on a great war between Republican moderates and leadership, you won't find it here. I'm . . . a team player, so I'm trying not to be divisive."

The committee's budget -- likely to pass in the House next week -- is tough-minded on discretionary spending. Government spending outside of defense and homeland security would drop 4.8 percent next year, then rise over the next five years at a rate that would not keep up with inflation. By decade's end, domestic spending would still be below this year's level, even before adjusting for inflation.

According to the Center on Budget and Policy Priorities, domestic programs would face cuts totaling $120 billion over five years. By 2009, environmental and natural resources programs would be sliced 14 percent below this year's level, adjusted for inflation. Even veterans programs would be cut 6 percent, according to the liberal center.

The House budget resolution orders $13 billion in entitlement-spending cuts, significantly more than the Senate was unable to pass. But with $150 billion in tax cuts also included, the House budget would leave the government $235 billion in the red by 2009. Deficits between 2005 and 2009 would total $1.4 trillion, $17 billion lower than Bush's proposal, on which House Republicans vowed to improve.

Budget experts question whether the cuts will happen. Already, interest groups are pressing to restore funding to politically popular programs. Debt AIDS Trade Africa, the international assistance group founded by U2 singer Bono, began airing an ad yesterday in Nussle's district demanding that he restore $4.7 billion that had been cut from international aid, which group leaders say will come out of Bush's global AIDS fund.

Spending cuts "can't work if they impose too much political pain," said Rudolph Penner, a Republican and former CBO director. "They're bound to disintegrate."