Phantom Surplus

By NANCY GIBBS

The Great American Budget Battle, Washington's answer to professional wrestling, has officially begun, all roars and growls and theatrical blows to the head. This week Congress will send the President a $792 billion tax-cut bill; he has promised to stomp on it. Clinton has pushed a $300 billion spending program, including a new prescription-drug program for Medicare; congressional fists are already clenched. There is talk of grand ideological warfare, of reckless spendthrift Democrats and reckless plutocrat-loving Republicans fighting over how to divvy up the glorious $3 trillion surplus. In this season's budget politics, much of the fight is phony. But that doesn't mean no one's going to get hurt.

The nastiest battles, where real blood may spill, are occurring in the committees of Congress that have to pass 13 spending bills by the end of the month to keep the government running. So far, only two have been sent to Clinton to sign; he has threatened to veto others if they gouge spending too deeply. But, if a $3 trillion surplus is expected over the next 10 years, why would lawmakers be forced to gut programs like air-traffic control and food inspection and counterterrorism? Because two years ago, they promised they would. The problem is the famous 1997 Balanced Budget Act, which balanced the budget only because Congress and the President agreed to cut the total amount of discretionary spending in future years, without having to say exactly what would be cut. Congress, like Wimpy, will gladly pay you Tuesday for a hamburger today.

Well, the future is now, and the caps are giving everyone a blinding headache. If military spending merely keeps up with inflation, then every other government program will have to be cut 20% in the next two years. This would require, for instance, slicing $16 billion this year from the huge, $315 billion bill that covers health and education. Increasing Pentagon outlays, as both sides have promised to do, could require 50% cuts elsewhere. That's not going to happen. But the minute the lawmakers bust the caps, the surplus starts disappearing.

That's because when the bean counters counted the beans and predicted there would be an extra $1 trillion in 10 years, not counting Social Security revenues, it was assumed that lawmakers would obey the laws they had written and slash future spending by billions of dollars. If lawmakers bail, then there's less extra money to pay down the debt. Republican proposals so far, rather than cutting spending, would increase it next year about $25 billion, which more than wipes out next year's projected $14 billion surplus. The only place to find that money is to raise taxes (the White House still loves a tobacco tax) or raid Social Security, as lawmakers have routinely done for years.

But this time around, both sides have promised not to touch the Social Security surplus, which will run about $147 billion next year. Republican leaders don't want to take the blame for scooping out an extra $14 billion just to keep the government running--especially after conservatives got so angry with them when they did it in 1998. "This year, if spending means so much to him, the President will have to justify dipping into the Social Security trust fund," says John Czwartacki, spokesman for Senate majority leader Trent Lott.

The most interesting thing about the phantom surplus is that by every indication, voters don't think it really exists either. But that has not prevented politicians on both sides from trying to woo them with proposals that Washington can't pay for. Republicans fanned out during their August recess to try to rally public support for their tax cuts--Please, let us give you more money!--but the polls showed a public unmoved. Voters said they would rather use the money, if it exists, to pay down the $5.6 trillion national debt. "People are genuinely fiscally conservative in this country," says Stephen Moore, an irrepressible supply-sider from the Cato Institute. Though personally he'd prefer deep tax cuts to spur growth, he finds in his travels that "a lot of people look at this mountain of debt and say, 'Gee, we really ought to start paying off the mortgage.' And the public really is onto this gambit of stealing from the trust funds."

Last week House Speaker Dennis Hastert and Lott acknowledged that the tax cut was dead for 1999. Unlike some G.O.P. moderates, Lott claimed he wasn't interested in a compromise--a little more spending for Clinton, a smaller tax cut for the G.O.P. Better to have the issue to take to voters next year. That suits most Democrats fine: Al Gore never misses a chance to denounce the G.O.P.'s "risky tax-cut scheme" and to promise that education and health care would have priority over tax cuts if the Democrats had their way. The only Democrat it may not suit is Clinton, for whom this budget is the last opportunity to get anything done that might count as a legacy.

But that leaves the immediate problem of the spending bills. Republicans who were around in 1995 are still spooked by Clinton's ability to put the blame on Congress if the government shuts down. So they are finding even more creative ways to slip programs over, under or around the caps. The census, which under the Constitution has occurred every 10 years since 1790, has been classified for 2000 as an emergency, along with at least $25 billion in other programs, because the 1997 caps exempted emergency spending. That exemption was supposed to cover things like floods and hurricanes, but floods of red ink and bad press apparently count too.

None of the options are pretty. Lawmakers will probably pass a continuing resolution to keep the government running at least past the presidential primaries and hope that some extra money falls from the skies by next January, after economists have recalculated the surplus. And in the meantime, through the messy magic of democracy, the public actually gets what it wants: the President has to wait for new spending; the Republicans have to put off their tax cuts; and as the months roll by, any surplus that actually materializes goes into paying down the debt. It's enough to make the title "The Do-Nothing Congress" a badge of honor.

--Reported by James Carney/Washington

With reporting by JAMES CARNEY/WASHINGTON