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WebMemo #576 on Federal Budget

September 28, 2004

Not Again! Congress Evades Its Budget Caps

By and

Here we go again! Earlier this year, both House and Senate leadership promised to restrain federal spending. But the appropriation committees must not have received the memo, and the appropriators are poised to unleash a series of spending increases. Using the time-honored methods of appropriations gimmickry, Congress seems to think that it can slip these items by budget watchdogs, unnoticed.

 

The Year of Fiscal Responsibility

But this was supposed to be the year of fiscal responsibility. Over the last three years, discretionary spending rose by 39 percent. Part of this was due to ramped-up spending on homeland security in the wake of September 11, but much of this spending paid for unrelated items.

 

To turn the tide against continued spending growth, the President's budget this year held non-homeland security, non-defense spending to a near freeze. Then the House passed a budget resolution that came in $2 billion under the President's proposal. Senate leadership agreed to be guided by the House's figure.

 

Although the appropriation bills seem to conform to their budgetary targets, closer examination reveals an array of gimmicks that the appropriations committees are using to disguise spending increases.

 

Pedestrian Emergencies

The first gimmick is to declare that routine spending is actually emergency spending. Emergency spending does not count towards budget resolution caps. Senate appropriation bills contain billions in this kind of "emergency" spending. One subcommittee affixed the "emergency" label to $1.2 billion of the $30 billion budget for Veterans' Administration hospitals just to make the books balance. In that same bill, $800 million for NASA exploration is also designated as "emergency." Space exploration may be a grand vision, but it is hardly a national priority and certainly not an emergency.

 

Line Items Designated Emergencies (in millions)

VA-HUD: VA Medical Emergency $1,200
VA-HUD: NASA Emergency $800
Treasury: Postal Service Emergency $507
Foreign Ops: AIDS Emergency $150
Foreign Ops: Sudan Emergency $150
Agriculture: WIC Emergency $125
Total $2,782

The list of emergencies goes on and on: It includes the nutrition program for women, infants, and children (WIC), the U.S. contribution to the Global Fund to Fight AIDS, and aid to Sudan. The fact that the bulk of these programs is funded normally proves that the "emergency" label is no more than an accounting gimmick used to circumvent spending limits.

 

Federal Help for Rainy (and Dry) Days

As if this were not enough, Congress has also circumvented budget controls to fund disaster relief for hurricane- and drought-stricken parts of the country. The federal government had already allocated $2 billion in relief, but more than $8 billion more is now zipping through Congress. Provisions in these bills include $72.5 million for "disaster relief" at various military facilities, $21.3 million for clean-up at national wildlife refuges, and an additional $126 million for NASA (which, according to appropriators, seems to be in a perpetual state of "emergency").

 

Natural Disaster Supplementals (in millions)

1st Hurricane Supplemental $2,000
2nd Hurricane Supplemental $3,100
3rd Hurricane Supplemental $7,100
Homeland: Argiculture Drought $2,980
Total $15,180

The $3 billion drought relief legislation sets a bad federal bailout precedent. All business ventures, including the business of farming, involve an assessment of risk. When risks are too high, businesses buy insurance in highly developed and specialized markets. The federal government should not be the backstop of risks gone bad, and it should not encourage businesses to take on irresponsible risks or to skimp on coverage. If farmers receive federal subsidies when their expected crop yields drops, what other industries suffering predictable, insurable misfortunes will be next?

 

Governments are terribly inefficient when they displace functioning private industries, and the insurance industry is no exception. Insurance is an especially dangerous area for government intervention because there is no end to the risks that the public would choose to avoid if it could. Would record companies seek recompense if Britney Spears' new album doesn't meet sales forecasts? Oops, there we go again.

 

Shell Games

Other elements of these appropriation bills show the lengths to which legislators will go to break spending caps. A mechanism built into the Labor-HHS appropriation bill would create false savings in order to increase spending. The ploy is to shift the dates that Supplemental Security Income checks will be mailed out in so that there will only be 11 monthly payments in FY 2005, creating the illusion of $3.2 billion in one-time "savings." By "cutting" mandatory spending, the appropriators made room to add $3.2 billion in discretionary spending without exceeding their budget allocation. After the spotlight moves to the next fiscal year, Congress will likely undo this slight-of-hand and surpass its budget caps.

 

Breaking its budget boundaries, the VA-HUD contains a non-germane rider that would extend the Milk Income Loss Compensation (MILC) program. This program subsidizes dairy farmers in the Northeast and Midwest and was set to expire at the end of this fiscal year. But an amendment sponsored by Sen. Herbert Kohl (D-Wisc.) would extend the program for two years. No funny math this time. The VA-HUD appropriation now surpasses its spending cap by $2.4 billion and guarantees $2.4 billion of out-year funding for FY 2006.

 

Other Items (in millions)

Labor-HHS: SSI Pay-Date Shift $3,200
VA-HUD: MILC Extension $2,400
Homeland: Phantom Customs Fees $784
Total $6,384
Grand Total $24,496

Conclusion

Some in Congress attempt to live by their commitments to fiscal restraint. Notably, the Republican Study Committee (RSC), as fiscally conservative as they come, has had some success moving disaster relief funding out of the standard appropriations bills, onto which they would have been tacked, and into separate, stand-alone legislation. The RSC now seeks, sensibly, spending trade-offs to pay for this relief. Likewise, Senator Don Nickels, Chairman of the Senate Budget Committee, is pressing the appropriations committees to live within their limits. After all, budgets are about setting priorities; if disaster relief is to be a priority, Congress should find a way to pay for it in its budget.

 

But despite the fiscal backbone of these few, many more in Congress are content to ignore the spending limits that they've set themselves. True, appropriators generally understand that they cannot surpass their budget allocations overtly, but still they rely on unseemly gimmicks. Congress should say "no" to these shenanigans instead of "oops."

 

Keith Miller is a Research Assistant in, and Alison Acosta Fraser is the Director of, the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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