Can Congress Discipline Itself?

The New York Times, February 8, 2002
By Leon E. Panetta

In the early 1980s, President Reagan tried to cut taxes, increase defense spending and balance the budget. The result was a 10-year period of deficits that quadrupled the national debt. Twenty years later, President Bush is in danger of repeating the same mistake.

The president has proposed a $2.13 trillion federal budget that makes the large tax cuts enacted last year permanent, increases defense spending by $48 billion and returns the budget to deficit. For the fiscal year starting Oct. 1, the shortfall will total $80 billion, and the budget is not projected to show a surplus again until 2005.

Administration officials have a simple explanation for this return to deficit spending. “This is a budget to win a two-front war,” said Mitchell Daniels, the director of the White House Office of Management and Budget. But the nation now confronts a war on three fronts—the threats at home and abroad from terrorism and the new threat from future fiscal instability.

Few question the need for additional spending for the war against terrorism. Spending for homeland security nearly doubles, to $38 billion, while the Pentagon’s budget increases by 14 percent, to $379 billion. Yet the bitter reality is that once the federal government resorts to a policy of borrow-and-spend policy, it is difficult to avoid the slippery slope back to ever larger long-term debt.

Contrary to the president’s promise in the 2000 campaign, the budget uses all of the Social Security surpluses to fund various government programs through 2013. A year ago, the administration projected it could slash the amount of federal debt outstanding to $1.6 trillion by 2007. Instead, the debt will rise to $3.4 trillion by 2007.

The lessons of the past 20 years of fighting deficits are clear: Presidents typically finance their own priorities fully at the expense of Congressionally favored programs. Once Congress gets done with the budget submitted by the president—usually adding money for its priorities—the red ink is likely to run much deeper. With the deficit reappearing, most members of Congress will feel entitled to push for new spending for their favored programs.

President Bush proposes deep cuts in programs like highway spending, job training, and technology research. Eight agencies take actual cuts or receive increases of 1 percent or less in discretionary spending. But it is difficult for him to argue for spending restraint while providing a virtual blank check on defense and homeland security.

Adding to the deficit problem are costs that are not included in the budget. It includes nothing for the reform of Social Security, for example, even though the 10-year cost for the administration’s reform has been estimated at $1 trillion. The budget also fails to include the cost to raise the income limits on the individual alternative minimum tax, which will otherwise adversely affect more than 40 million taxpayers over the next decade. That fix alone could exceed $300 billion.

And the budget squeeze could get tighter if revenues fail to live up to expectations. The budget’s economic assumptions are based on the passage of the economic stimulus plan this year, which failed in the Senate two days ago. The administration itself predicted that, without the stimulus package, growth for the remainder of this year would be reduced by half a percentage point.

Finally, the most important tools for budget discipline no longer exist. In the 1990 budget agreement, the president and Congress agreed to enforce mandatory caps on discretionary spending and required that any new tax cuts or spending initiatives be paid for so as not to add to the deficit. Both Democrats and Republicans were willing to enforce those rules.

As Chairman of the House Budget Committee and later as Director of the Office of Management and Budget, it is my view that without those restraints, the budget would never have been balanced. Today, caps on discretionary spending are either ignored or bypassed by budget gimmicks and there is no requirement to pay for new spending. The result is obvious – if Congress is unwilling to discipline itself, then the inevitable result will be a larger deficit.

Now that the law requiring these spending limits has expired, there are no mandatory caps on discretionary spending. Nor is there any requirement that all new programs be paid for. With a Congress unwilling to discipline itself, the result will be a larger deficit.

Of course, the veto pen of the president is another restraint on the budget process. But relying on a presidential veto often leads to fiscal and political crisis. When presidents of one party propose budgets unacceptable to the other party, and that party controls the House or Senate, the result is gridlock—or, all too often, pork-barrel deals made to end it.

For the last four years, crisis has driven the budget process more than consensus has. These last-minute agreements between the president and Congress inevitably lead to increases spending. Last year alone, Congress added more than $726 billion to the President’s proposed budget.

Fortunately, those increases were cushioned by large surpluses. Now that those surpluses are gone, avoiding a runaway deficit will require leadership and will power from the president and Congress. Unless they’re willing to enforce budget discipline, the nation is likely to embark upon another long era of deficit spending.

© 2002 The New York Times