Do US spending caps still matter?

One of Washington's proudest fiscal achievements of the past two decades - the balanced-budget agreement of 1997 - today lies in tatters.

That doesn't mean big deficits are poised to return. A booming surplus largely generated by the strong economy has made the pact an anachronism in many ways, like "Newt for Speaker" buttons, or playoff tickets for the now-woeful Florida Marlins.

In fact, Uncle Sam's balance sheet is in such good shape that the current GOP effort to, at least, not tap Social Security funds to run the rest of the government may be beside the point, fiscally-speaking.

"We should first of all appreciate that things have gotten a lot better. This year we'll still pay down the debt by $100 billion," says James Horney, a fiscal expert at the Center on Budget and Policy Priorities here.

When President Clinton and Congress struck their budget pact two years ago, everyone realized that the caps on domestic spending required by the agreement would cut deeply into popular programs.

But without the caps it would have been virtually impossible to reach the agreement's goal of a balanced budget in 2002.

What the parties involved did not quite realize at the time was that their deal was struck at a moment in history when the US economy was poised to erase the era of deficit spending practically all by itself.

A Washington truism often applied to nuclear-arms control may hold for the budget agreement as well: It became possible only at the point where it was no longer necessary.

All year, a significant minority of fiscal conservatives have argued that the GOP needs to stay within the caps, however tight, to demonstrate the commitment of the party to a smaller federal government.

But with the money rolling in, and the deficit a dimming memory, neither the House nor Senate leadership can muster a majority for such stringent fiscal discipline.

The Clinton administration, for its part, would stay under the caps by raising taxes, primarily on tobacco products. That's an approach that most GOP lawmakers consider anathema.

Over budget - but how much?

Until it's all over, adding up the figures in Congress's yearly appropriations process is about as easy as measuring the height of a child who's bouncing on a trampoline. Congressional leaders admit they have surpassed the caps, though it is hard to say by exactly how much.

One expert figures they are about $25 billion over their previously set spending limit. That includes "emergency" spending such as the farm-aid bill, which technically doesn't count against the cap, but still involves tax money marching out the door.

"They are playing with a lot of accounting games right now," says Peter Sperry, a fellow in budgetary affairs at the Heritage Foundation in Washington. "They are busting the caps."

From the Republican point of view, right now the more important figure is $9 billion. That's approximately the amount of savings they have to find to avoid dipping into the Social Security surplus to pay for the rest of the government.

Many budget experts say the goal of keeping the government's hands off the Social Security surplus is a good one. In essence, it establishes a fall-back line for fiscal responsibility. The Social Security surplus next year is projected to be some $100 billion. For Washington to avoid spending all that money would be a significant achievement.

"It is a victory just in making the fight to do it," says Mr. Sperry.

But this week, the GOP leadership is finding out just how difficult that fight is. A plan to save the $9 billion by delaying earned income tax credit payments to low-income workers appears politically dead, after it was criticized by presidential aspirant Gov. George W. Bush (R) of Texas.

At time of writing, Republican leaders were considering voting a year-end, across-the-board $9 billion cut. But if defense is exempted from such reductions, as some in the GOP want, then the cut doubles for the rest of the government.

Republicans could be attacked for laying off thousands of Head Start teachers, for instance.

Penny-pinching?

Some analysts say the GOP is twisting itself into a pretzel to avoid spending an amount of money that is relatively small when measured against the overall amount of today's surplus. Uncle Sam cheerfully spent the entire Social Security surplus, and then some, for years, they point out.

"In the long run, running a balance [in Social Security] makes sense," says Mr. Horney of the Center on Budget and Policy Priorities. "It is not important that you have a balanced non-Social Security budget in each and every year."

(c) Copyright 1999. The Christian Science Publishing Society