Budget Will Balance When Pigs Fly
Caught up in the blow-by-blow accounts of the budget battle in Washington, one might suppose that something of historic importance is happening. It isn’t. We’ve gone down this road before, but never arrived.
In 1974, President Richard Nixon observed that previous fiscal arrangements did not “impose sufficient discipline on the Congress to stop the passage of pork-barrel legislation or to resist the pressure of special interest groups. This lack of discipline in congressional procedures has been one of the major factors behind the sizable increases in federal spending over the past decade.” To remedy this condition, he signed into law the Congressional Budget and Impoundment Control Act.
This law created an elaborate system, still in operation, to ensure that the federal government would exercise its fiscal powers in an informed, coordinated way. It established House and Senate budget committees and the Congressional Budget Office, imposed a new appropriations process and a new budget-making calendar, and required the government to reconcile its separate appropriations acts with an overall spending limit.
Obviously, it didn’t work. Since its creation, the deficit has grown exponentially, and the budget-making process has been anything but orderly. By the mid-1980s, spending was so far out of control that Congress, like Ulysses chained to the mast of his ship to resist the siren song, passed a law to constrain its own budgetary decisions. This was the infamous Gramm-Rudman-Hollings Act of 1985, which stipulated that Congress would gradually reduce the deficit to zero in 1991.
But Gramm-Rudman, as it quickly became known, worked no better than the 1974 law. Congress, while pushing the day of reckoning further into the future, played accounting tricks, and deployed smoke and mirrors. When 1991 arrived, the deficit missed its original zero target by $269 billion. Despite blatantly breaking its own law, Congress exercised mercy on itself while finding culprits elsewhere.
Finally, in the budget deal of 1990, President Bush and Congress scrapped the ineffectual legal restraints, raising taxes in violation of the president’s read-my-lips campaign pledge. Still, the deficit rose to $292 billion in 1992, helping to seal Mr. Bush’s re-election fate, before receding to somewhat smaller but still historically gargantuan levels under President Clinton.
Now, having endured months of huffing and puffing by both sides in the budget battle, are we to conclude that once the requisite compromises are made and a new agreement is reached we can look forward to a balanced budget in seven years? Do you believe that pigs will soon fly?
Even if the two sides really cared about balancing the budget, the nature of their deal clearly shows its make-believe character. The balanced budget, like pie in the sky, will arrive by and by. In politics, seven years is equivalent to an eternity. Neither side proposes to impose much pain on any important special-interest group before next year’s elections. The GOP’s proposed spending for fiscal 1996 comes to $1,590 billion, the administration’s to $1,579 billion, or 99.3 percent as much.
The Republicans promise to get tougher later. Their projected spending grows by 2.9 percent over the next seven years, as compared with 3.8 percent for President Clinton’s. Even under the GOP projections, however, government spending grows faster than the gross domestic product, which is forecast by the 50 prominent private economists surveyed by Blue Chip Economic Indicators to increase at 2.4 percent annually.
However strongly we may regard the politicians’ sincerity, deals about spending and taxing in the remote future carry no weight. As budget expert Allen Schick has written, “Budgeting has become an improvised activity in which each year’s rules and roles are adapted to the needs and opportunities of the moment,” and “as conditions change, so does the form of improvisation.”
To gain bargaining leverage, both sides have pressured their in-house forecasters - the Congressional Budget Office and the Office of Management and Budget - to produce biased forecasts. Allegedly because of unanticipated third-quarter economic growth, the CBO recently revised its estimates, narrowing the difference between the two sides by a whopping $135 billion. That prompted House Budget Committee Chairman John Kasich to conclude that “there are additional resources now on the table.”
But such statistical manipulations have no substance. No one knows what the state of the economy, and therefore the federal finances, will be years from now. As forecasters, both the OMB and the CBO have deplorable records. Mr. Kasich’s “additional resources” are utterly imaginary.
Even if both sides were genuinely knowledgeable about the economy’s future performance and serious about their budgetary commitments, the current Congress cannot bind any future one. Any deal cut this year can, and almost certainly will, be overturned by future deals. Or simply disregarded.
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