There are 27 questions below about various aspects of the current budget debate (28 if you count the Question Of The Week). See if you can find them all.
Where is Alan Greenspan? The Federal Reserve Board chairman has testified several times this year that the best thing to do with the surplus is nothing-that is, no tax cut and no spending increase. Why, then, hasn't he been making the type of statements he made back in 1993 that interest rates might not have to be raised if Congress and the president exercised some fiscal self control? It can't be for fear of not getting reappointed.
Where Is The Bond Market? Never mind Greenspan-where is the bond market on the surplus? If interest rates depend on the level of federal borrowing to such a large extent, if lower interest rates are expected to result from bigger surpluses that are used to reduce the federal debt held by the public, and if the bond market does better when interest rates are falling, why isn't Wall Street more involved in this year's debate?
Where Are The Others? For that matter, why aren't other segments of the economy that also do better when there are lower interest rates-realtors, homebuilders and mortgage bankers, to name a few-also pushing hard for the surplus to be used for debt reduction?
Where Is The Business Community In General? If there is a tax cut this year, there is little likelihood of it being directed at the business community. If that is the case, if lower interest rates will benefit corporate America, and if lower federal debt will result in lower interest rates, why isn't the business community pushing harder for the surplus to be used for debt reduction?
Has The Budget Debate Become Less Important To The Financial Markets? Since at least the early 1990s, Wall Street has been assumed to be very concerned about the deficit and the amount of federal borrowing. Indeed, shortly after he took office, President Clinton reportedly was furious that his fiscal policy would have to be determined in large part by what bond traders in New York wanted. Since that time, however, Wall Street seems to be far less concerned about the size of the deficit or surplus. Is it possible that in a $9 trillion economy that continues to grow by leaps and bounds, a $20-30 billion change in a yearly budget estimate is so small that Wall Street no longer cares what Washington does with it?
What Does That Say About $536 Billion Over 10 Years? The Office of Management and Budget's update, released on Monday, increased the projected surplus by more than $500 billion over the next 10 years. That could provide Congress and the Clinton administration with the dollars they need to cut a budget deal that will include a tax cut and a spending increase. If the economy continues to grow and $30 billion a year becomes an even smaller percentage of GDP, will financial markets, the Federal Reserve Board, and anyone else concerned about interest rates not care? Will that give lawmakers a free pass to do what they want?
Is It Possible That The Relationship Between Federal Borrowing And Interest Rates Was Really A Hoax?
Has Any One Noticed That Rosy Scenario May Be About To Return? The OMB update indicates that "Rosy Scenario," the use of optimistic assumptions to make the budget forecasts look better over the long term that was so popular in the 1980s, may be on the verge of making a comeback.
Does Anyone Really Think 10-Year Budget Forecasts Will Be Accurate? We barely have the ability to know what the real numbers will be 10 days from now. Why is anyone seriously basing whether we should have a tax cut or spending increase on a 10-year projection whose chance of being correct is probably less than one percent? Is it wishful thinking? Do they have no other choice?
Does Off-Budget Mean Anything Anymore? With the Social Security trust fund officially off-budget, the highway trust fund effectively immune from budget controls and Congress on the verge of doing the same thing for the airports and airways trust fund, why isn't anyone talking about just going back to the pre-1969 budget display, when all trust funds were separate from the rest of the budget? Don't we seem to be headed there anyway? Wouldn't that make the debate easier?
When Are We Going To Start Talking About A Serious Change In The Budget Process? The Nussle-Cardin bill that is supposed to be debated by the full House this week is really only tinkering around the edges of the current Budget Enforcement Act process. Serious reform will have to involve a discussion about whether, when there is a surplus, there should even be caps on appropriations and pay-as-you-go rules for taxes and entitlements. The past two years have amply demonstrated that this will not be a simple or quick debate. Shouldn't we use the discussions that led to the Congressional Budget Act, which took more than two years to complete and was enacted as stand alone legislation, as a model? Or would everyone prefer to do what was done with Gramm-Rudman-Hollings and the Budget Enforcement Act, both of which were mostly written behind closed doors and then attached to other legislation?
Fiscal Y2K Countdown
As of today there are 36 potential legislative days left before the start of fiscal 2000. If Mondays and Fridays, when Congress typically does not do much legislative work are excluded, there are only 22 days left.
Question Of The Week
Last Week's Question. There were two winners for last week's question, which asked you to come up with some organization that might want to purchase the naming rights to a federal facility if they were being sold to raise cash for other purposes. An "I Won A Budget Battle" T-shirt goes to Scott Miller of the Pennsylvania Higher Education Assistance Association for his suggestion of the "Ford, Mercury, Lincoln Memorial." Evelyn Morton of the American Association of Retired Persons wins for her suggestion of American College of Obstetrics Department of Labor. Technically, Evelyn is not eligible for a T-shirt because of the Blum Rule (named for former CBO Director Jim Blum who won three weeks in a row) which limits T-shirts to people who have not won in the previous six months. However, because she assures me that her entry was really suggested by her husband, Richard, the judges have decided that the rule does not apply in this case.
This Week's Question. One of the big questions above talks about a new budget process because the appropriations caps and PAYGO rules will be expiring. The caps last through the end of fiscal 2002, but how long will the pay-as-you-go rules continue to be applied? Send your response to scollender@njdc.com. Who knows, you might win an "I Won A Budget Battle" T-shirt to wear on the beach or at the pool over the July 4 weekend.
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