Congress has produced a budget resolution
(H. Con. Res. 68) that appears to hold spending to levels outlined
in the 1997 Balanced Budget Agreement (BBA) while stabilizing
Social Security, providing Americans with modest tax cuts, and
increasing critical spending to maintain and preserve a strong
national defense. The resolution was produced in a timely fashion
after extensive consultation between House and Senate budget
leaders which limited the differences between the two bodies and
reduced, if not eliminated, the need for lengthy conference
committee negotiations. Both houses of Congress demonstrated their
commitment to honor the pledges made in 1997 and should be
commended for showing fiscal responsibility.
Although it is on the right track, however,
Congress faces a challenge to maintain this framework as the budget
process moves into the appropriations phase. The chairmen of the
House and Senate Appropriations Committees have expressed their
doubts that Congress will be willing to honor the commitments it
has just made. According to a recent report in The Washington
Post:
Interviews with most of the 26 chairmen of
the House and Senate Appropriations subcommittees that fund the
federal government revealed widespread doubt that the spending
limits can be maintained and exasperation with colleagues who
refuse to exceed them even as they demand funding for pet programs
and projects.
Because of the projected budget surpluses,
many Members of Congress no longer recognize the need to restrain
spending. But a failure to maintain fiscal discipline could have
profoundly negative effects if the projected surpluses fail to
materialize. Predicting government revenues is less reliable than
predicting the weather, and unforeseen circumstances, such as the
conflict in Kosovo, could turn an expected surplus flood into a
trickle or even a drought. Simple prudence, therefore, dictates
that Congress should not target any of the projected surpluses
until it is clear that they in fact will be realized.
There
are various methods Congress should use to control spending.
However, communication, commitment, and conviction will be critical
to success. For Congress to adhere to the proposed budget
framework, it must remain mindful of important lessons it has
learned from prior budget processes.
FISCAL DISCIPLINE IS KEY
It
will be difficult for Congress to honor the commitment it made in
1997. In the Balanced Budget Agreement of 1997, Congress and the
President agreed that combined defense and domestic discretionary
spending for fiscal year (FY) 2000 would not exceed $538 billion.
Many analysts at the time pointed out that the BBA depended heavily
on outyear savings and were skeptical that fiscal discipline would
prevail when the outyears arrived. As former Heritage budget
analyst Scott Hodge observed, for example:
The
experience of the last six budget deals (1982, 1984, 1987, 1989,
1990, and 1993) clearly indicates that future year promises never
materialize. That is why tough enforcement mechanisms are needed to
ensure that lawmakers honor whatever fiscal discipline is agreed to
in the deal, and that its promises are met.... A sound balanced
budget plan must show immediate results in the next fiscal year (FY
1998) and not delay the hard work until after 2000 (known as
"back-loading").
That
the skeptics were right became clear when President Bill Clinton
presented his FY 2000 budget. The Congressional Budget Office (CBO)
estimated that his budget would increase the current services
baseline (what the government would spend if there were no changes
in law or new programs) and exceed the caps by $22 billion in
budget authority, or a total of $560 billion in discretionary
spending. The recently enacted
budget resolution commits Congress to maintaining the spending caps
while increasing budget authority for national security programs by
$10 billion and providing educational programs an additional $2
billion in budget authority. Consequently, using the CBO's
assumptions, Congress must trim $34 billion from President
Clinton's proposed domestic discretionary spending programs. Even
discounting impacts on the current services baseline, the budget
resolution restricts FY 2000 budget authority to $11 billion less
than the President requested.
Methods to Control Spending
Although it will not be easy to reduce the
President's domestic programs, it is not impossible. Potential
savings can be realized, but it will take a great deal of hard
work. The following methods will enable Congress to achieve the
goal of fiscal discipline in the FY 2000 budget:
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Closely examine the 3,037 line
items in the President's FY 2000 budget proposal.
The Appendix to the President's budget prepared by the
White House Office of Management and Budget (OMB) contains a
listing of the President's spending proposals by line item. The OMB also provides a
spreadsheet version of the 3,037 line items on its Web site. Most of these line items
are programs that should also be listed and explained in agency
budget justifications or annual performance reports under the
Government Performance and Results Act (GRPA, or Results Act). A
failure by an agency to explain certain line items is an indication
that those items may not merit funding. A prominent example is the
Centers for Disease Control and Prevention's Violent Crime
Reduction Programs, which received $51
million in the President's FY 2000 budget. The Appendix contains no
explanation of these programs, and the FY 2000 Results Act report
issued by the Department of Health and Human Services (HHS), the
CDC's parent agency, fails to explain how violent crime came to be
classified as a disease.
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Do not fund
pork.
Almost every section of the Appendix to the President's
budget contains funding proposals for limited regional, state,
local, or special-interest projects. Examples include $6 million
for Panama City Beaches in Florida, $4 million for the Indianapolis
Central Waterfront, over $47 million for Lackawanna River projects
in Pennsylvania, $12.8 million for Wisconsin bus facilities and
buses, and $70 million for the Salt Lake City South Light Rail
Transit project. Few, if any,
special-interest projects qualify as national priorities, and
therefore most should not be funded.
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Devolve local programs to the
states.
Although it is not within the jurisdiction of the
Appropriations Committees to de-authorize or devolve federal
agencies, they can and should restrict the funding of programs that
encroach on state and/or local authority. The Appropriations
Committees also should include language in the report accompanying
the appropriations bill to indicate that authorizing committees
should devolve such programs to the states. Many federal programs
that focus on providing services at the local level were
established when state and local governments were small, poorly
funded, and unable to attract skilled professionals. Examples
include agriculture, housing, rural and urban development, land
management, and social welfare programs. Although it may have been
appropriate for the federal government to administer these programs
when they were established, state and local governments are capable
of assuming most of these responsibilities today. The Corporation
for National and Community Service, for example, administers eight
programs at a cost of $546 million.
AmeriCorps, the largest of the eight, is little more than a
re-creation of the Community Education and Training Act (CETA)
program that President Ronald Reagan abolished because it was
redundant of local government programs. President Reagan recognized
that federal administrative overhead costs could be reduced by
allowing local governments to run "community" programs.
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End obsolete programs.
Some programs that were established with specific and
limited objectives continue to operate and receive funding even
though they have accomplished their goals. For example, the Rural
Utilities Service, with a budget request of $34 million for FY
2000, successfully electrified rural America long ago and as an
obsolete program should no longer be funded. Unnecessary programs
include the National Telecommunications and Information
Administration's Information Infrastructure Grants program in the
Department of Commerce, funded at $20 million in FY 2000 even
though telecommunications giants such as MCI, GTE, and AT&T are
more than capable of absorbing these costs. The
President also has requested $357 million in FY 2000 for the
Corporation for Public Broadcasting (CPB) even though cable
television broke the monopoly on broadcast programming held by the
"Big Three" networks 20 years ago. Today, Americans can watch
hundreds of programs on such channels as A&E and the Discovery,
History, and Learning Channels. Funding for such agencies should be
restricted to the minimum amount that is needed to effect an
orderly shutdown.
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Combine programs to eliminate
duplication of effort and expense.
Many government programs duplicate the activities of programs in
other departments or agencies. Examples include overlapping land
management programs in the Department of Agriculture and Department
of the Interior, as well as environmental programs of the U.S. Army
Corps of Engineers and the Environmental Protection Agency. A
September 1997 analysis by Angela Antonelli of The Heritage
Foundation, for example, noted that:
Food
safety is addressed by 16 different agencies, including the
Departments of Health and Human Services and Agriculture.... There
are 342 economic development programs managed by 13 agencies....
Ten departments, three independent agencies, one federal
commission, one presidential council, and one quasi-official agency
administer 131 juvenile programs at a cost of $4 billion a
year.
If this duplication of effort had been
addressed during the 1998 budget appropriations process, Congress
would face an easier task today. Combining such programs under the
responsibility of a single agency would save administrative costs
and reduce expenditures by eliminating duplication of effort. The
Appropriations Committees could facilitate this process by
combining funding for these programs into a single, reduced line
item in the budget.
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Close programs that compete
with the private sector.
Some programs, such as NASA's Space Launch Services and
the U.S. Geological Map division, compete directly with the private
sector or discourage major private-sector initiatives. Most of
these programs were established when it was cost-prohibitive for
the private sector to provide similar services. Although advances
in technology have reduced the barriers to entry into such service
areas, many private corporations are deterred from establishing or
expanding operations in these areas because they would not face
taxpayer-subsidized competition. The Advanced Technology Program,
funded at $252 million in FY 2000,
provides largely the same service as venture capitalists currently
funding research in Silicon Valley. The Small Business
Administration, funded at $263 million for FY 2000, not only
competes with venture capitalists, but also spends more on its
regional and district offices ($129 million) than on
entrepreneurial development ($94 million). The Appropriations
Committees should reduce funding for such programs to cover only
the services they provide to the government, and include language
indicating that authorizing committees should privatize these
programs.
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Use the agencies' annual
Results Act performance reports to identify potential
savings.
Many of the departmental reports prepared in compliance
with the Results Act show the offices, bureaus, and programs in the
agencies that have little to do with their five-year strategic
goals or one-year performance plans. Any spending item that does
not advance a strategic goal or contribute to a performance measure
should not be funded. The Department of Labor's FY 2000 Results Act
report openly acknowledges that "There are some instances where an
agency's contribution to a goal is not apparent." As an example, the
department cites the Women's Bureau, which is funded at $8 million
for FY 2000. The department also
could cite the Bureau of International Labor Affairs, funded at $76
million, which is not referenced
in the department's FY 2000 Results Act report as a program that
contributes to departmental strategic or performance goals.
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Limit unexplained program
increases to the rate of inflation.
Even a cursory review of the President's budget proposals reveals
numerous programs that are projected to receive funding increases
well above the rate of inflation. Most offer no reason why the
increased funding level is needed. For example, the Justice
Department's request for an increase in its general administration
account funds is not accompanied with an explanation for funding
increases of 8.5 percent between FY 1999 and FY 2000. Nor is this account
cited in the department's FY 2000 Results Act report, which
estimates that expenditures for management will reach $268,383,000
in FY 2000, "an increase of 145% from 1998 levels and is 136%
increase from 1999 levels." The
explanation for this increase is lengthy but short on details.
Congress should require agency heads to explain such spending
increases in their agency Results Act reports and when they testify
before the Appropriations Committees. If they are unable to justify
these increases, their requests for additional funds should be
denied.
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Adhere to budget
deadlines.
At this point, Congress appears well positioned to
complete the budget process within the timeline established by the
Congressional Budget and Impoundment Control Act of 1974, as
amended by the Gramm-Rudman-Hollings Act. Experience has
demonstrated the importance of meeting budgetary deadlines in order
to avoid an end-of-the-fiscal-year train wreck. If Congress adheres
to its self-imposed deadlines, the House will send the Senate the
appropriations bills with enough time for passage before the break
for the traditional summer "district work period." It then would be
possible to conduct final negotiations with the Administration
without evoking threats of a government shutdown.
The
dynamics of surplus revenues may make it particularly critical to
adhere to established budget timetables this year. Many analysts
believe that the Congressional Budget Office will issue a report in
mid- to late summer predicting larger than expected surpluses for
FY 2000, including an "on-budget" surplus. If Congress completes
the appropriations phase of the budget process before the release
of the CBO report, it will be much easier to resist pressure to
squander the projected surplus on wasteful programs.
By
making difficult choices early, Congress will be able to allocate
any surplus revenue to the effort to save Social Security, pay down
the national debt, or reduce taxes. But these choices may be very
difficult if Congress misses its deadlines. Delaying appropriations
decisions until late summer or fall could well put Congress in a
position like that of a dieter trying to exercise will power in a
candy store.
COMMUNICATION, COMMITMENT, AND CONVICTION
ARE CRITICAL
If
there is any hope for Congress to adhere to the proposed budget
framework, Members must remain mindful of the following important
lessons:
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Previous commitments should be
honored.
The strong spending limits laid down by Congress in the Balanced
Budget Act of 1997 produced the current budget surpluses, and
equally strong fiscal discipline will be required to protect
them.
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Communication
works.
Continual consultation across Capitol Hill helped the House and
Senate Budget Committees draft resolutions with few major
differences, thereby reducing the time needed for conference
committee proceedings. House and Senate Appropriations Committees
should work closely with each other to minimize the work of the
conference committees, which traditionally have been both a
bottleneck and a source of extraneous spending not approved by the
House of Representatives or the Senate.
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Convictions require
courage.
The ink was not yet dry on the budget resolution before it was
attacked as harmful to the elderly, children, and working families.
Almost every attempt at fiscal responsibility in the past 20 years
has evoked accusations of callousness. By its very nature, fiscal
responsibility means that some special-interest groups will get
less of the taxpayers' money than they think they deserve. Standing
up to special-interest groups to do what is best for America is
part of the job of elected officials, and will require courage.
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The longer the process lasts,
the more difficult it will become.
As the budget process approaches the end of the fiscal
year, the opportunities for brinkmanship will increase
exponentially. The normally severe political pressure that
surrounds the end of the fiscal year is likely to be compounded
this year by CBO projections of surplus revenues in FY 2000.
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Estimating the size of the
surplus is difficult.
It has been said that predicting the size of the surplus is like
predicting the weather. Simple prudence dictates that Congress
should not "spend" any projected surpluses until it is clear that
they will be realized. If Congress authorizes spending the
surpluses and they fail to materialize, it will face difficult
election-year choices: raising taxes, cutting promised spending, or
presenting the voters with a deficit when they expected a
surplus.
CONCLUSION
Many
congressional leaders have expressed their doubts that a majority
of Congress will be willing to enforce the fiscal discipline
required to honor commitments Congress made in the 1997 Balanced
Budget Agreement and the budget resolution just passed. A major
defect of the 1997 BBA, which was identified at the time it was
enacted, was that it backloaded the difficult spending cuts it
required.
The
President has failed to honor his commitments under the BBA and has
submitted a budget that exceeds the combined spending caps.
Consequently, Congress faces the difficult task of holding the line
on unnecessary new spending even though it is in a period of budget
surpluses. And as the country is now learning, unforeseen
circumstances such as the Kosovo conflict may occur that wipe out
surpluses and make the need for fiscal discipline even more
urgent.
Communication, commitment, and conviction
are critical to completing the appropriations process in a timely
manner. Delaying tough decisions will only make them more
difficult. It is better to choose a fiscally responsible course of
action now than to have to explain a reversal of fortune later.
The
task facing Congress may be difficult, but it is not impossible. By
using the methods for controlling spending outlined above, Congress
can display the courage of its convictions and commit itself to
requiring that new spending be clearly justified and subject to
serious performance measures, reducing pork-barrel spending,
reducing program waste and duplication, ending programs that are
obsolete, and sending programs that are not appropriately federal
in function back to the states and local communities.
Congress pledged to Americans that it would
restrain spending in 1982, 1984, 1987, 1989, 1990, and 1993; each
time, it broke its promise. The 106th Congress can end this string
of betrayal. The 1997 Balanced Budget Agreement was a commitment
that Congress made to the American people, and that commitment
should be honored.
Peter Sperry is a former Budget Policy Analyst
in The Thomas A. Roe Institute for Economic Policy Studies at The
Heritage Foundation.