End-of-year spending battle could get ugly

September and October are supposed to be pleasant months. The weather gets cooler. The leaves change color. Kids go back to school. But on Capitol Hill, one word is being used to describe the next two months: ugly.

In fact, although the annual end-of-session legislative crunch usually is not pretty, this year's go-round may reach new levels of gruesomeness. "I think its going to get extremely ugly," said Richard E. May, the former Republican staff director of the House Budget Committee and now a principal at the Washington lobbying firm of Davidson & Co. Inc.

So agrees Stanley Collender, the managing director of the federal budget consulting group at Fleishman-Hillard Inc., a Washington public relations shop. "No one knows what to do," said Collender, also a columnist for GovExec.com, "and no one knows how to do it."

Congress returns this week from its long August recess with only one of the 13 annual appropriations bills having been signed into law by President Clinton. The remaining 12 are in various states of disarray, and fewer than 20 legislative days remain before the start of the new fiscal year on Oct. 1.

Moreover, a nasty showdown is looming over the Republicans' $792 billion tax cut package, which Clinton has repeatedly promised to veto. Also simmering in the legislative stew are a variety of other major unresolved issues, including gun control, a financial services industry overhaul, a minimum-wage increase, and managed care reform.

Once again, bitter budget politics may overshadow Capitol Hill and doom other legislation for the year. Veteran Republican strategists in both chambers already concede as much. "The well is going to be poisoned, and it's going to be difficult to get these resolved," said a senior Senate GOP aide. Added James W. Dyer, majority staff director of the House Appropriations Committee: "I don't know if there's any life ... in the big macro issues."

According to Dyer, a growing "body of thought" is that Congress should simply finish the appropriations bills and do little else before adjournment, which is tentatively slated for Oct. 29. Such a scenario may be fine with some Democrats, who have well rehearsed their "do-nothing Congress" rhetoric. Plus, one Democratic source noted that the fewer non-appropriations issues that are resolved, the more money that can be spent on reducing the federal debt, a White House priority.

The first fight may come over the tax cut bill. GOP leaders have not yet sent the legislation to Clinton; they said they wanted to use the August break to talk up tax cuts to the public. But as they return to Washington, House and Senate Republicans appear divided over a post-veto strategy.

In the Senate, some Republicans believe that after Clinton vetoes the bill, the congressional GOP should not begin bargaining with him over how large a tax cut he will accept. Instead, these Republicans argue, their party should take the issue to the electorate during the 2000 campaign. "If they're not going to get [the big] tax cut, they're not going to go for any tax cut," said the senior Senate GOP aide. "They just want to blame him [Clinton]."

But House Republicans-led by Speaker J. Dennis Hastert, R-Ill.-don't want to go home for the year without a tax cut, said a House Republican leadership aide. "I think Denny wants to get a tax cut in the bank," the aide said. "If you go into negotiations on appropriations bills and do not get the tax cut, you've got nothing to take home to the voters."

House Republicans are considering a strategy in which they would divide up the tax cut package into several smaller pieces. They might, for example, send Clinton one bill that rectifies the tax code's marriage penalty and another bill that includes tax breaks for small businesses. And they could up the ante by tacking on Democratic priorities, such as an increase in the minimum wage, to some of these bills.

"I think there is some discussion about whether Republicans want to get something [passed], or get the issue," said a former House Republican aide well-acquainted with end-of-year battles. She said she expects that Republican leaders will decide their strategy based on the reaction to the tax cut that they received from voters during the August break.

Meanwhile, the White House recently intensified its campaign against the tax package. The Office of Management and Budget used the issuance of a routine report to make clear that entitlement programs could suffer steep cuts if the GOP tax cut bill were enacted.

"If the President were to sign the Republican tax package as written, over the next five years [it] would trigger across-the-board cuts in mandatory spending, including $41 billion from Medicare [and] $19 billion in farm programs," White House Press Secretary Joe Lockhart told reporters on Aug. 25.

Republicans responded by accusing Clinton of misleading taxpayers. "In his unending effort to find an excuse to deny American workers and families a tax cut, the President has now gone to scare tactics and outrageous, apocalyptic future budget estimates," said Senate Budget Committee Chairman Pete V. Domenici, R-N.M. He argued that the GOP tax cut plan would not result in Medicare or farm program cuts.

At the same time that congressional GOP leaders and the White House are circling each other over tax cuts, the two sides must develop a strategy for handling the remaining appropriations measures. Huge monetary and policy issues remain unresolved in many of the bills, and neither chamber has even started work on the most contentious measure, the one funding the Labor, Health and Human Services, and Education departments.

Republicans would rather not have to negotiate a last-minute mega-deal that bundles together the unfinished appropriations bills and gives Clinton much of what he wants. Instead, they hope to send the President as many individual appropriations bills as possible. "We're going to be knocking the bills down one at a time," said Dyer.

Maintaining at least a somewhat orderly process also helps keep to a minimum any buzz among the news media and the Democrats about a possible government shutdown. "It's difficult to say you want to keep the government open if you don't send the bills down" to the White House, said May, the former Budget Committee GOP staffer. "Republicans cannot look like they're itching for a government shutdown."

Looming over the appropriations battle is the question of the budget surplus. Both sides have vehemently denied that they want to tap the vast portion of the surplus that has been generated by Social Security in order to pay for their pet programs. But huge cuts in discretionary spending will be necessary if they don't draw on the surplus.

The senior Senate Republican aide flatly declared that Congress will have to dip into Social Security in order to finish the spending bills. "We cannot, in a fair, objective way, tell people we are not going to touch the Social Security surplus," the aide said.

House Majority Whip Tom DeLay, R-Texas, recently floated the idea that Republicans may try to use the non-Social Security surplus ($14 billion) for their spending priorities-and thus force Clinton to tap the Social Security surplus (some $140 billion) for his priorities. Democrats, however, aren't going along. "We're supposed to pass 'let's pretend' appropriations bills and set the President up for a sucker punch," said House Appropriations Committee ranking member David R. Obey, D-Wis. "I don't think so."

As high-level haggling commences this month in Congress's back rooms and on the air waves over appropriations and tax issues, other legislation, such as campaign finance reform and managed care reform, will be debated on the House and Senate floors. The House GOP leadership aide said that he expects Congress will be able to pass several major nonappropriations bills-most notably, overhauls of the financial services industry and the nation's bankruptcy laws, as well as a reauthorization of the Federal Aviation Administration.

Still, finding a consensus on complicated policy matters in this politically charged atmosphere may prove difficult, and time is running out. One House Democratic aide said that the lack of a broad deal on tax and spending priorities "probably will end up shaping everything else." The aide added: "If both sides dig in, it's hard to see them agreeing to anything else."

Conservative House Republicans, for their part, are gearing up to fight legislation on such issues as gun control, hate crimes, and the minimum wage. "There's going to be a lot of defense we're going to have to play," said an aide to a House conservative Republican.

Earlier this year, many on Capitol Hill assumed that Congress and Clinton would package a slew of unresolved legislation-perhaps even sweeping Medicare and Social Security reforms-into an end-of-year budget deal. But such a scenario is now unlikely, according to key aides. With a five-vote margin in the House, Hastert may not have the clout to help broker such a deal, and Senate Republicans do not want one, the House Republican leadership aide said.

For now, Republicans are concentrating on not surrendering too much to Clinton during the critical spending talks. "There is a strong mentality among Republicans that every time they get in a room with Clinton to negotiate, they get rolled," the House Democratic aide said.

May, a veteran of budget negotiations, said that the White House again seems well-positioned for the standoff. "At the end of the fiscal year, they're going to get a bunch of money, and that's what they want," May said. And Obey flatly declared, "The President has the cards."