The likely spending fight

OPINION:

The White House has been sharpening its knives for months in anticipation of the huge battle over appropriations that it plans to wage after the Democratic-controlled Congress returns from its August recess. According to a tally by CQ Weekly, President Bush has threatened to veto nine of the 12 annual appropriation bills and has demanded funding offsets in another to accommodate increased spending for veterans’ health care. Before the appropriations war begins, a bit of context, history and perspective seems to be in order.

Discretionary spending, which is covered by the annual appropriations process, currently represents about 38 percent of total federal spending. Net interest payments and mandatory spending, which includes entitlement programs (e.g., Social Security, Medicare and Medicaid), account for the rest (about 62 percent) of the federal budget. Discretionary spending for security — which includes outlays for national defense and homeland security as well as supplemental spending for the wars in Iraq and Afghanistan — accounts for 60 percent of total discretionary outlays. The balance, about 40 percent, finances national parks, NASA, the Centers for Disease Control and Prevention, transportation, No Child Left Behind, etc. Excluding spending for the wars, the White House and Congress will be battling over about $23 billion in discretionary spending. That amounts to less than eight-tenths of 1 percent of total projected federal outlays in 2008.

While we welcome the fiscal restraint now being demonstrated by President Bush and congressional Republicans, we regret that their unrestrained profligacy during the previous six years has contributed so much to the fiscal challenges that now confront the nation. During the last six years alone, federal outlays have increased by 49 percent, rising from $1.863 trillion in fiscal 2001 to a projected $2.779 trillion for fiscal 2007, which ends Sept. 30. Inflation-adjusted federal outlays have increased nearly 27 percent in six years. (Federal spending in 2001 was less than 10 percent above its 1995 level.) For the 2001-07 period, the average annual real increase in federal outlays exceeded 4 percent. Because the real economy would have increased by only 2.5 percent per year between fiscal 2001 and fiscal 2007, federal spending as a share of the economy jumped from 18.5 percent in 2001 (a recession) to 20.2 percent in 2007 (the sixth year of an expansion).

Among the more fanciful trends in the White House’s 2008 budget was its projection that nominal (including inflation) non-security discretionary outlays will fall each year for the next five years. Another was its projection that total real federal outlays, after having increased by more than 4 percent per year over the previous six years, would rise by an average of less than three-quarters of 1 percent during the next five.

What does all this mean? Virtually the entire budget war will be fought over less than 1 percent of federal spending.