Congress Braces for Battle Over Spending Priorities
Last January, the Congressional Budget Office (CBO) projected that budget surpluses would total $5.6 trillion in fiscal years 2002 through 2011. Last week, CBO released figures projecting a $4 trillion drop in the cumulative surplus to $1.6 trillion. Over the next two years, the agency projects a return to budget deficits for the first time since 1997. A $21 billion deficit is expected for fiscal year 2002 and a $14 billion shortfall is anticipated in fiscal 2003. In 2000, the government ran a record surplus of $237 billion.

The White House’s Office of Management and Budget (OMB) also released highlights of its budget projections last week. Unlike CBO’s projections, which assume no changes in current laws or policies, OMB’s calculations take into account legislation that is likely to become law as well as new spending and tax proposals the President intends to include in his budget request. As a result, OMB projects even greater short-term deficits: $106 billion in the current fiscal year, $80 billion in fiscal 2003, and $14 billion in fiscal 2004.

Analysts attribute the budgetary plunge to the economic recession, the costs of fighting the war on terrorism, and the 10-year $1.35 trillion tax cut enacted last Spring. In the short run, the recession is most at fault for the worsening numbers. As the economy recovers, however, the blame shifts squarely to the tax cut. As the Center on Budget and Policy Priorities reports, by 2010 the tax cut is the largest single factor in the deterioration of the surplus, accounting for 52 percent of the decline – more than all other factors taken together.

The gloomy budget numbers are sure to have consequences for programs that serve low-income and vulnerable populations. The Administration has signaled that many federal programs will be subject to budget freezes or cuts to finance the on-going war on terrorism. Discretionary spending in the President’s 2003 budget proposal, to be released February 4, will total approximately $750 billion. This represents a nine percent increase over current funding levels, but defense and national security account for most of this growth. Overall growth in areas not related to these initiatives is expected to be limited to two percent.

Under the President’s budget, $48 billion will be available for new defense spending and almost $38 billion for national security. Senate Budget Committee Chairman Kent Conrad (D-ND) has warned that the proposed defense budget will only be affordable through deep cuts in other programs, deficit spending, or a repeal of part of last year’s tax cut.

President Bush has stated that his budget will contain food stamps restorations for certain legal immigrants and increased funding for both the Special Nutrition Program for Women, Infants, and Children (WIC) and the Job Corps Program. However, the President has not outlined how he intends to pay for these increases. The President has also proposed spending $8 billion over three years to provide prescription-drug benefits to low-income seniors, and $190 billion over 10 years on a Medicare overhaul and drug coverage plan. Critics warn that the proposal falls far short of what is needed to provide the elderly with affordable access to prescription drugs.

While Congress will stand behind Bush’s war on terrorism, the costs it will exact on other spending priorities will cause considerable hand-wringing on the Hill. There is uncertainty as to whether the House and Senate Budget Committees will be able to agree on a budget resolution this year. Appropriators in each body could use their own chamber’s resolutions to guide spending decisions, but passing conference reports without a unified budget will remain tricky.

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