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Executive Memorandum #322 on Federal Budget

February 10, 1992

The Bush Budget: Audit #1 Real Increases, Phantom Cuts

By


(Archived document, may contain errors)

2/10/92 322

THE BUSH BUDGET: AUDIT #1 REAL INCREASES, PHANTOM I CUTS

Despite their pro forma'criticism of the Bush Administration's fiscal 1993 budget, leading Democrats in Con- gress have not immediately declared it "dead on anival," as they have previous budgets. One reason: despite talk of cut s by the White House, domestic spending is on track to increase m ibre during four years of George Bush 'than during twelve years of Jimmy Carter and Ronald Reagan. This meahi; that there am more taxpayer dollars --than expected to fund Congress's pet pro j ects. But skillful White House accounting tricks cover up this fact. The Administration claims that it is keeping spending growth in line. Although total federal spending tops $1.5 trillion, says Office of Management and Budget (OMB) Director Richard Darm a n, this is only 2.8 percent (or $41.6 billion) higher than the fiscal 1992 budget. This claim is deceptive. For one thing, the Administration makes use of actual reductions in defense spending and the costs of bailing out failed Savings and Loans (S&Ls) t o mask huge increases in domestic spending. When the mask is removed, ho@vevdr, -total domestic spending in fiscal 1993 (excluding the S&L bailout costs and not interest costs on the federal debt) climbs to $907 billion, - up nearly $52 billion-or 6.0 perc e nt-over fiscal 1992. The Ekish Elinge: Domestic Worse still, even after adjusting for inflation this record Spending Has Grown More Than level of domestic spending is more than 23 piercent higher Under ' Carter, Reagan Combined ..than domestic spending in Ronald Reagan's last budget in Parcentaos Inoreales In Dow."fic ftending fiscal,1989 (again, excluding S& L bailout and net interest 25%_/ ... costs). B' comparison, total domestic spending grew by X.: y only 22 percent in real terms between 1977 and 1989 . .... ......... 20%_ Spending Binge. If his 1993 budget becomes law, Bush will have increased domestic spending by an average of ............ nearly $37, billion per year, after adjusting for inflation. ,This is-not only seven times the average under Reag a n, but .............. .. 10%_, also is double the annual average of $19 billion under Jimmy Carter. Maintgining.the official pretense that spending is being 5%-' State of the Union message that N cut, Bush declared in his A .............. we must get the f ederal deficit under control." And Ad- . . . . . . . . . . . . . . . . . 0%2 @P= ministration officials point out that the budget eliminates Carter Reag Carfor and Bush 246 "unjustified programs" and reduces spending on 84 114 Years) (6 fta9an (4 Waris) ( 1 111 Veare) others. What these officials omit telling taxpayers is that 1"te. Increase represents overall increase In domestic sperding these savings 'go to finance higher spending in 177 other over tum term ot pneeldancy. in constant i9ae dollars. J p gra ms. Sourcei Budget of the U& Government. FY.1903. Harlts"Doeftwt ro

To pull off this slight-of-hand, Bush budget officials are taking advantage of taxpayers' ignorance of two ar- cane budget terms: budget authority and budget outlays. Budget authority is like the line of credit a bank or a credit card company might give a customer. Just as the customer can make, purchase commitments under a line of credit, so budgetauthority allows federal agencies to commit themselves to now spending. Outlays, by contrast, am the annual disbursements. These are the same as checks written b y a family. Increasiqg Outlays. What the Bush budget does is freeze budget authority for domestic discretionary pro- grams at the same level as fiscal 1992,. roughly $203billion. But at the same time, it allows domestic discretion- ary outlays to grow by $ 8.5 billion in fiscal 1993 or about 4 percent. Thus in fiscal 1993 the savings achieved by eliminating or reducing spending for 330 programs totals.$13.1 billion in budget authority-but only $1.5 billion in outlays. Meanwhile, 177 programs-'receive increa s ed fund- ing. Although this costs the -government roughly $13 billion in budget authority- Bush Cuts Budget Authority, equal to that "saved"-from the eliminations- But Outlays Gfow outlays will increase. by $9.7 billion. So.al- though the line of credit s t ays the same, the net amount of checks written goes. up $8.2 billion.1 The increases in program funding are de- Reduce'---M'7IXW fended as part of the-President's economic Total growth package,. intended to jump-start the economy. But while certain types o f govern- EIJI ment spending may contribute somewhat to Not. Budget Change the economy's performance, the cost , to,the 11M a# economy in taxes on borrowing usually off- M111t:111691t 0ovemment.-FY-1993. sets any benefit. %For example, more money for the S uperconducting Supercollider certainly will give a boost to the. local -economy in'Texas, where the proj- ect is located, but the money taken away from taxpayers in New England to pay -for it will mean fewer jobs and less growth in that region. Thus the B u sh Administration's attempt to spend America back to prosperityamounts to little more than shuffling the deck chairs on an economic Titanic. Real.Speading. Cuts Needed. There are many "economic recovery". plans currently swirling around the halls of Congr e ss. Some plans would pay for cutting taxes on. some income 3 groups -by rai ing the taxes on another in- coine.-group. Odierplans, like the President's, would help in some.. waisbu t largely use accounting maneuvers to suggest to taxpayers that something i s being done.. Each. of these approaches is flawed because each ignores the core economic problem facing America: runaway federalspending is draining the lifeblood out of the private sec- tor. A sound-economic recovery plan must do one simple thing: cut t he growth in federal spending and return -the money in tax-relief to ordinary Americans.

Scott A. Hodge Grover M. Hermann Fellow in Federal Budgetary Affairs

F or further information: Scott A. Hodge, ad, A - Prosperity Planfor A merica - Fiscal 1993 (Washington, D.C.: The Heritap Foundation, 1992)

I The budget increases other discretionary programs by $300 million. This unspecified spending, when combined with the $9.2 billion net increase totals $8.5 billion, equal to the overall increase in damestic discretionarY spending

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