September 17, 2003

Small Steps

By Stan Collender

President Bush's nationally televised speech requesting an additional $87 billion to continue military activities and rebuild Iraq raises a number of interesting questions:

The most interesting question, however, is this one:

The administration was saying that, after growing the annual deficit to $550 billion or so, it will be able to trim it back to some $275 billion five years hence. Why would the White House try to take credit for leaving a deficit at all, let alone one that would be very high by nominal standards and a half-trillion-dollar shift from the $236 billion surplus that existed the year Bush was elected?

The answer is twofold.

First, cutting the deficit to $275 billion is the best the White House can do under its current budget and economic policies. And even this number assumes no additional tax cuts, unlikely spending limits and no other new contingencies that will increase the deficit further.

Second, and far more important, the Bush administration has clearly decided that actually balancing the budget (let alone returning to substantial surpluses) is not only impossible but also not politically necessary for the president to claim that his budget policies should be considered a success.

When it comes to the budget, White House officials have adopted a goal that is less ambitious than others think necessary for three reasons: They don't want to go any further, the existing policies won't take them there anyway, and because they don't see budget success as requiring them to go that far.

Actually, this unstated policy is quite politically astute. The budget debate in Washington has stalled in recent years because those who are alarmed by the Bush administration's approach generally have been focused on completely eliminating the deficit or getting back to a surplus—that is, going much further than the White House has been willing to go. That has forced these critics to consider politically suicidal spending and tax options. Before long, even the general goal of getting all the way back to surplus seemed kamikaze-like, and so little was done to rein in administration proposals.

The real alternative to the president's approach is not returning to surpluses by 2008, but rather a series of interim goals that eventually lead to something better than what the White House is promising. Reaching these goals would provide some type of year-by-year improvement instead of waiting for just one success at the end of the five years.

It would also fundamentally change the budget debate. Proposals could be acceptable even if they did not achieve a balanced budget by themselves. They could be smaller and cause less political pain, and therefore would not be dismissed out of hand. And so long as the interim goals were achieved, they would also be considered a "success."

Perhaps most important, the president would feel more pressure to engage in this new debate. Instead of explaining why the budget isn't balanced or saying it will halve the deficit in five years, the administration could be forced to explain why its policies are not living up to this year's goal.

This interim-goal approach would actually be very much in keeping with both U.S. policy-making in general and federal budgeting in particular. With only a handful of exceptions (the decision to go to the moon by the end of the 1960s, for example), most major policy changes have been done incrementally rather than all at once. All of the budget programs of the past 15 years—Gramm-Rudman-Hollings, the Budget Enforcement Act and the Balanced Budget Act— included year-by-year goals, and success was determined when they were achieved.

Interim goals also have the benefit of being more achievable because the numbers on which they are based are more realistic. The $5.6 trillion surplus projected at the start of the Bush administration that never materialized was supposed to be realized over 10 years, a period that in federal budget terms is closer to science fiction than economic and political reality. The same can be said of the Bush administration's pledges to cut the deficit in half in five years. That promise is based on spending, revenue and economic assumptions that are not likely to occur—which makes the assurance less than adequate.

By contrast, year-by-year goals would be far more likely to be based on reality. That would make both the incremental objectives and ultimate goal far more likely to actually be reached.

Question Of The Week

Previous Question. Each month, the Financial Management Service of the U.S. Treasury releases a report on the federal government's previous month's spending and revenue collections and the results year-to-date. The report that is produced in late October includes the results from the previous October through the end of September, that is, for the entire previous year. Therefore, the correct response to last week's question is the Treasury Department, and the winner of the "I Won A 2003 Budget Battle" mouse pad is Virginia McMurtry, who works for the Library of Congress.

This Week's Question. There are two chances to win an "I Won A 2003 Budget Battle" mouse pad this week. The Office of Management and Budget was not always called OMB and was not always a part of the Executive Office of the President.

Question 1: Which department did OMB come from?

Question 2: What was OMB's name when it was transferred?

Click here to send in your response, which must be received by 5 p.m. PDT on Saturday, Sept. 20, 2003. If there are multiple winning answers, the "I Won A 2003 Budget Battle" mouse pad will go to the person selected at random from all those who submit the correct response. You must include your mailing address so the mouse pad can be sent if you are the winner.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the mouse pad actually gets to you.