Nothing like a good surplus projection to grease the skids of the appropriations process!  By raising its estimates of the Federal surplus, to over $100 billion for this year, OMB has done its part to make it possible to move appropriations acts this year.  The estimate of an additional trillion dollars in surpluses for the next 15 years helps the process greatly.  These estimates provide the necessary political cover for more spending, tax cuts, and "saving" Social Security.

Congress and the President can now work on a strategy that will give something to everyone - tax cuts for those who demand them, increases in programs for others, while assuring the viability of Social Security for another chunk of years.  Of course, some programs will also have to be cut since there are those in Congress who demand this.   And to keep civil servants happy there will be a hefty pay raise.  Of course, all this is of no comfort if your program is the one to be cut.

By now (June 24, 1999) the shape of a resolution of the issues related to the budget can be discerned.  The Administration will change its estimate of the surplus, to make it larger and more close to those of the CBO, providing more reason to use more money or to change the caps.  The Congressional leadership will cut some of the appropriations acts to accommodate the demands of those who would like to make significant program cuts.

All this may well add up to the proper balance of cuts and spending that will make it possible for Congress to pass appropriations bills and for the President to sign them.   But it may not happen by October 1.

Last year, after six continuing resolutions (CR), appropriations acts were passed (including the Omnibus catch-all one) and a  shutdown was avoided.  At the time, October 1998, I stated: But next year there may be a repeat - not everyone is happy with the outcome of the FY 1999 process, and the same issues may be joined next summer.  Stay tuned.

So far this year, a repeat is underway.  The first salvo was the Emergency Supplemental appropriations for FY 1999, which was hostage to many competing interests.  Now, the interlocking laws that Congress and the President have put in place to control deficits, and the 1997 budget deal, set the stage for a major confrontation:   The overall Federal budget allocations to appropriations committees mean that there must be cuts of $18.5 billion, or 3.3%, in discretionary spending budget authority.  The Senate and the House have chosen to allocate these cuts in different ways.  For example, the Senate wants to increase defense by $5.4 billion (and cut Veterans, Housing, and Independent Agencies, including NASA and EPA, by $9.9 billion).  The House wants to increase defense by $12 billion, but cut VA-HUD-Independent Agencies by "only" $6.1 billion.   These cuts are mandated by overall Federal budget processes aimed at cutting the deficit.  Yet the Federal deficit situation has completely changed in the last couple of years - from deficit to surplus.  It is not possible to function in the government with a set of rules that never envisioned a surplus.   The 1997 budget deal, to which President Clinton and Congress agreed, set overall limits or "caps" on spending.  The caps mean the very large cuts in discretionary spending from FY 1999 levels.  Next steps would be for all to agree that what was set in concrete in 1997 no longer makes sense and that a new overall Federal budget deal needs to be worked out. This, however, is easy to say. Getting there may not be possible.

The whole matter hinges on the fact that the procedures that Congress has put in place for the budget process only deal with reducing deficits. There are cleverly interlocking laws that force budget cuts and do not allow increases in spending. The law is clear in what must be done, and that leads to the enforcement of the caps and budget cuts. If there were still large projected deficits then there would be little to discuss. All would agree (as they did in 1997) that the deficit has to be cut. The President and Congress would proceed to cut programs, and there would be little chance of grandstanding on the issue.   But the current situation is different - surpluses are projected as far as the eye can see. However, the laws never envisioned surpluses, so there are no processes in place to deal with them. The rationality of cutting programs while there is a constant positive cash flow escapes many, both in the Administration and Congress. The rational thing to do would be to change the systems that are now enshrined in law, forget about the old bad deficits, and go on with life, but this is not what is happening.

In my opinion, 1995-96 will be replayed. After all, the 1997 deal resulted from the 1995-96 government shutdowns and the inability to achieve a compromise. I hope that it will not come to the same impasse, but resolution of the issue may have to wait until after the November 2000 elections - the winner then will decide how the problem will be resolved. Meanwhile, expect continuing resolutions and omnibus appropriations acts, and an unsettled situation.

I believe that ultimately matters will be resolved, but it will not be neat and clean.  Why do I believe that resolution will take place?  Read last year's reasons:

It is a gigantic game of chicken.  How to know what is going on?  Sources of factual information on the situation are the press, such as the Washington Post. You can find it at http://www.washingtonpost.com.   There is a section with an analysis of the overall budget situation and what it means.  You can also search the site for "shut down" or "shutdown" or "furlough."  The Post covers government activities well.  The information you would be looking for is usually not on the front page, but it is available.

 

The Analyst believes that a resolution is reached in these situations - sometimes after much pain. Congress and the President, after all, are attempting to get the best deal for the country, and they are smart people who do not want to throw everything into chaos - this generation of political leaders did that once, and I don't think that they want to do it twice. Watching this work itself out, however, can be a harrowing experience.