April 23, 1999
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.1
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.
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").2
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.3 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.
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:
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.4 The OMB also provides a spreadsheet version of the 3,037 line items on its Web site.5 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,6 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.7
Do not fund
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.8 Few, if any, special-interest projects qualify as national priorities, and therefore most should not be funded.
Devolve local programs to the
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.9 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.
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.10 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.
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.11
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.
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 2000,12 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.
Use the agencies' annual
Results Act performance reports to identify potential
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."13 As an example, the department cites the Women's Bureau, which is funded at $8 million for FY 2000.14 The department also could cite the Bureau of International Labor Affairs, funded at $76 million,15 which is not referenced in the department's FY 2000 Results Act report as a program that contributes to departmental strategic or performance goals.
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 2000.16 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."17 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.
Adhere to budget
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.
Previous commitments should be
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.
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.
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.
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.
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.
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.
4. See Appendix, Budget of the United States Government, Fiscal Year 2000, p. 437. Cited hereafter as Budget Appendix. U.S. Department of Labor, DOL Plan 2000, January 10, 1999. The author gratefully acknowledges the invaluable assistance of Heritage Research Assistant Greg VanHelmond and Domestic Policy Intern Shelley Cordova in linking line items to program descriptions in the Budget Appendix.