CHN: Budget Outlook Worsens

Appropriations Process Moves Forward Slowly
On July 12, the White House Office of Management and Budget (OMB) announced that the government is expected to run a $165 billion deficit in fiscal year 2002, and $109 billion in FY 03. Under President Bush’s FY 03 budget request released in February, OMB had estimated a $106 billion deficit this year and $80 billion next year. Just one year ago, the federal government was operating under a $127 billion surplus. OMB latest estimates predict a return to a modest surplus in 2005.

Surpluses have turned to deficits for several reasons – the weakened economy and tumbling stock market, the expense of fighting terrorism, and the costs of last year’s $1.35 trillion tax cut, chief among them. Just as Democrats blame the White House for pushing through the costly tax cut by using overly optimistic budget projections last year, they have cast doubt on OMB’s newest figures, asserting that the Administration is using unrealistic economic projections to both understate current deficits and overstate the speed and size of recovery. According to Senate Budget Committee Chairman Kent Conrad (D-ND), the deficit in FY 03 is likely to reach $200 billion. Senate Republicans are themselves at odds with the White House, projecting a $190 billion deficit next year.

The Administration is using the gloomier budget outlook to maintain a tough line against increased discretionary spending. House and Senate appropriators neared a deal on a $30.4 billion FY 02 supplemental spending bill (HR 4775) the week of July 8, but negotiations collapsed after the White House threatened to veto any measure not sticking close to the $28.8 billion in spending for defense, national security and aid to New York the President requested.

As a way to get closer to the spending caps imposed by the Administration, OMB insisted that appropriators remove funding for the Workforce Investment Act (WIA) originally included in the bill. Supplemental spending for WIA was included in the bill to restore a rescission of dislocated worker funds passed by Congress last year and to provide additional funds for National Emergency Grants. The supplemental funding for WIA was requested by the President and approved by both chambers of Congress.

It is expected that the House and Senate will vote on a revised $28.9 billion supplemental measure next week. In additional to defense and homeland security funds, the bill contains, among other items, $1 billion for the Pell Grant program, $205 million for Amtrak, $31 million for the Securities and Exchange Commission to enhance enforcement, and $417 million for medical care for veterans.

OMB Director Daniels has warned that the Administration is prepared to stand firm on spending limits during the regular FY 03 appropriations process as well. The House-passed budget resolution (H Con Res 353) grants appropriators $759 billion to divide among the 13 spending bills that must be approved this year. Although the Senate never approved a budget resolution of its own, appropriators in that chamber have informally agreed to a $768 billion spending limit for the upcoming fiscal year.

This year’s appropriations process has been stalled by disputes surrounding overall spending limits and, more recently, by President Bush’s call to create a new Cabinet-level Department of Homeland Security. Under plans outlined by Bush, the agency would assume authority over programs projected to cost $37.5 billion in FY 03. Appropriators must determine which of their 13 subcommittees will have jurisdiction over the new department.

Currently, the Senate is outpacing the House’s work on appropriations, with Senate Appropriations Committee Chair Robert Byrd (D-WV) promising to move all 13 bills through his committee before Congress adjourns for its August recess. By contrast, the House is unlikely to see committee-level approval of the Labor-HHS-Education, Commerce-Justice-State, and VA-HUD spending bills before the August recess. These are among the largest, and typically most contentious, appropriations measures.

Budget and Appropriations