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WebMemo #385 on Federal Budget

December 16, 2003

Omnibus Spending Bill Hikes Discretionary Spending by 9 Percent in 2004

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The Heritage Foundation projects that the omnibus appropriations bill (HR 2673) that is currently in the Senate will set the stage for discretionary spending to increase by 9 percent in 2004, rather than the 3 percent figure commonly cited by Members of Congress.

Following increases of 13 percent and 12 percent during the previous two years, 2004 would mark the third consecutive year of massive discretionary spending growth (see chart below).

discretionary spending chart

The discrepancy between the two numbers can be explained by the difference between budget authority and outlays. Budget authority refers to the amount of money Congress and the President release to federal agencies to spend; an amount that can be easily manipulated. Outlays are the amount actually spent in a given year- and the amount taxpayers must pay.[1]

Accounting Gimmicks

While discretionary budget authority is projected to increase 3 percent (from $849 billion to $873 billion) upon completion of the 2004 omnibus spending bill, outlays will likely rise by 9 percent (from $824 billion to $900 billion), according to Heritage Foundation calculations based on Congressional Budget Office data. [2

Congress held down 2004 budget authority growth by using the simple accounting gimmick of assigning new spending to the 2003 fiscal year instead of the 2004 fiscal year. Not only did this artificially reduce the 2004 totals, it also artificially increased the 2003 totals - thus shrinking the spending gap between the two years, and creating the illusion of limited spending growth. Here are three examples:

  1. In March 2003, the midpoint of the 2003 fiscal year, lawmakers enacted a $79.2 billion supplemental spending bill for the war in Iraq. This turned out to be much more money than was actually needed for the 2003 fiscal year, and consequently much of the outlays will be spent in 2004. Yet all of the budget authority was assigned to 2003.
  2. During this year's appropriations debate, Congress reclassified $2.2 billion of 2004 education spending into the 2003 spending totals. This reversed last year's decision, when lawmakers interested in keeping the 2003 budget numbers artificially low had reclassified this amount into the 2004 spending totals.
  3. Lawmakers rescinded $1.8 billion in unspent post-9/11 emergency funds and redirected it into new 2004 spending priorities. Up until now, this budget authority had not been needed, and was not going to be used. Rather than sparing taxpayers its cost, Congress instead took back the money to add to 2004 outlays.

Spending $20,000 per Household

By assigning much of the budget authority back to 2003, lawmakers allowed the 2004 budget to appear comparatively flat, even though actual outlays will grow significantly. Note that these projections assume no additional supplemental spending bills for the 2004 fiscal year. If history repeats itself, another spring supplemental spending bill will add $30 billion in 2004 outlays and push the year's discretionary spending hike up towards 13 percent.

This fiscal slight-of-hand is merely a continuation of past abuses, going well beyond discretionary spending. Mandatory spending is set to grow beyond its 2003 record of 11 percent of the Gross Domestic Product, and will accelerate even faster upon implementation of the Medicare drug benefit. As economic growth pushes interest rates back up, the $55 billion decrease in net interest costs since 2001 will likely reverse itself. The 2004 omnibus spending bill includes thousands of pork projects, ranging from the Please Touch Museum in Philadelphia, to the Rock and Roll Hall of Fame in Cleveland, to construction of a single traffic light in Briarcliff Manor, New York.[3]

Altogether, total federal spending in 2003 topped $20,000 per household for the first time since World War II, and is set to grow another $1,000 per household in 2004.[4]

It is time for President Bush and Congress to stop playing budget bookkeeping games and take a stand against runaway spending by rewriting the omnibus appropriations bill.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Show references in this report

[1]Highways and mass transit funding also create a discrepancy between budget authority and outlays. This spending is classified as mandatory budget authority and discretionary outlays. So in this analysis of discretionary spending, they appear only in outlays.

[2] The Congressional Budget Office currently estimates 2003 discretionary outlays at $824 billion (this is different from the commonly-cited $847 billion total, which CBO says is an outdated estimate). The 2004 estimate of $900 billion comes from the CBO's Current Status of Discretionary Appropriations, as of December 5, 2003, located at http://www.cbo.gov/showdoc.cfm?index=2049&sequence=0.

[3]See Brian M. Riedl, "Another Omnibus Spending Bill Loaded with Pork," Heritage Foundation Webmemo No. 377, December 2, 2003, at http://www.heritage.org/Research/Budget/wm377.cfm.

[4]See Brian M. Riedl, "$20,000 per Household: The Highest Level of Federal Spending Since World War II" Heritage Foundation Backgrounder No. 1710, December 3, 2003 at http://www.heritage.org/Research/Budget/BG1710.cfm.

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