Here is another heaping serving of tidbit-like items to get your budget juices flowing after a week of fiscal R&R during the Independence Day holiday.
Redefine the "Surplus," Again?
The midsession review released by the Office of Management and Budget several weeks ago may have been the beginning of another attempt to redefine the way the federal surplus is calculated. Until last year, official Washington said that the surplus was the difference between total outlays and total revenues. Last year's debate changed things, as the surplus talked about most often by federal policy makers became the amount that federal revenues exceeded spending not including Social Security.
The midsession review started talk about a concept that has seldom, if ever, been discussed before in even theoretical terms-that the surplus is the amount by which federal receipts exceed spending excluding Social Security and Medicare. Immediately after the administration released its updated numbers, congressional Democrats pointed proudly to the fact that the surplus would be $39 billion in fiscal 2000 excluding both of these programs and that this was the first time since Medicare was established that there had been a surplus under this definition.
Congressional Republicans have not yet informally adopted this new concept, which is hardly surprising given that it would greatly reduce the amount available for anything other than Social Security and Medicare, such as tax cuts. But if the process by which last year's redefinition came to be budget gospel is any indication, there should be little doubt that the White House will succeed in making this the new standard if it chooses to do so.
The Lessons of Countercyclical Revenue Sharing
A long time ago, in a fiscal galaxy far, far away, there was a program called "countercyclical revenue sharing" that provided funds to state and local governments across the country when an economic stimulus from Washington was thought to be needed. The key element of the program was that it was triggered only by certain economic events and so was not supposed to be a source of revenue that could be counted on every year.
The idea was to create a short-term boost by giving state and local governments additional funds that they would spend as they saw fit. They were always cautioned not to do things that assumed that the increases would be permanent. As a result, hiring additional full-time police or teachers who would stay on the payroll after the countercyclical funds had been suspended was considered to be the wrong thing to do, while one-time activities like buying police cars or textbooks made much better sense.
There are startling similarities between countercyclical revenue sharing funds and the current budget surpluses. Both were triggered by economic events. Both could provide a short-term boost. And most important, like countercycle revenue sharing funds, the surplus could easily disappear next year.
With that last similarity in mind, it makes little sense for Congress and the White House to be pushing for the budget surplus to be used for permanent tax cuts or spending increases when the funds could be anything but permanent. A far better choice would be for Washington to put in place a one-time tax rebate that applies only to this year, when the surplus is much more certain, than to bet the farm (and city and suburbs) that the surpluses will continue every year from now on.
An Inconvenient Budget Process
To say the least, it is interesting to watch Congress struggle with the current budget process. Although members have obviously decided that the current caps on appropriations should not be enforced and have all but abandoned the pay-as-you-go rules, this week they are planning to use the reconciliation procedures to consider a tax cut because it will make it easier to be debated and passed. This is close to budget anarchy: Existing procedures, rules, and prohibitions that get in the way are simply abandoned, while those that make it easier for things to happen are used in ways that were not anticipated when the rules, procedures and prohibitions were put in place.
What makes all of this even more anarchistic is that the changes are being made in an ad hoc way-nothing is being confirmed officially or formally. There has been no vote to abandon the caps and PAYGO rules, let alone a committee hearing about whether it would be a good idea.
When is Someone Going To Ask This Question?
One of the most important problems hampering the debate over what to do with the budget surplus is that many of the key questions have yet even to be asked, let alone answered. For example, policymakers should want to know at what point it no longer makes sense to use the surplus to pay down the debt. Is there some point at which additional debt reduction will not put as much downward pressure on interest rates as Federal Reserve Board Chairman Alan Greenspan says will happen currently? Or at what point will an additional dollar invested in education, research and development be more valuable than that same dollar being used to lower federal borrowing?
An even better question is whether there is any way information like this can be built into federal budget decision making.
Question of the Week
Previous Question. Two weeks ago, readers were asked to come up with an appropriate tag line or slogan that could be used by federal budget users, watchers, analysts or taxpayers. The answers were all over the board (and the political spectrum). There were many variations on "What's Up?" or "Whatzzz Up?" as well as a similar group of plays on the Nike line of "Just Do It." The winner of an "I Won A Budget Battle" T-Shirt, however, is David Smith, acting chief of the engineering development division at Pine Bluff Arsenal, for his entry that referred to the federal debt: "Pay it off, pay it ALL off!"
This Week's Question. As noted above, the reconciliation procedures are going to be used to expedite consideration of a tax bill in Congress. The question: How many votes does it take to override a filibuster of a reconciliation bill in the Senate? Send your response to scollender@nationaljournal.com by 5 p.m. EDT on Saturday, July 15, 2000. Please include the address to which you want the T-shirt sent if you win. If there is more than one correct response, the winner will be selected by random drawing from all of the correct entries.
Coming Soon: The Budget Person Of The Year
For the third consecutive year, Budget Battles will ask readers to nominate and vote for the budget person of the year, the individual or organization that has had the most positive impact on the federal budget debate. All nominating and voting will be done online. Details to follow in the weeks ahead.
NEXT STORY: TSP's C Fund rebounds in June