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By some accounting, the budget agreement of 1997 is a vague imitation of New Deal liberalism, or still yet, a conservative plot to benefit the rich, for what it proposes to do to so-called discretionary federal spending.

Discretionary spending is the more than $500 billion the government doles out each year by way of appropriations bills. Almost half of it funds the national defense. The rest finances all general functions of government: airline safety, highway construction, crime prevention, education, science research, tax-collection, customs, and so on. The budget deal, if it comes to fruition, requires levels of discretionary spending that, in dollar terms, results in minimal change. Under the blueprint, non-defense discretionary spending increases incrementally from now until the end of the Clinton presidency, then slips back to 1998 levels in the year 2001 and 2002. With inflation rising 3% a year, the actual value of those dollars declines substantially over time. By the year 2002, the figures imply a cut of about 10% in discretionary-spending programs.

If the deal sticks, domestic discretionary spending by the year 2002 would fall to only 2.8% of the U.S. economy's total output. That would be down from a peak of nearly 5% in the late 1970s and would be its first time below 3% since 1963 before the Great Society was launched. Defense spending would be about 2.7% of the economy, down from 10% as recently as 1986 and the smallest share since 1940.

President Clinton won in 1992 on a platform that stressed shifting government spending toward "investment in the future" and, implicitly, away from "consumption" subsidies. This budget deal does the reverse. Almost every area of spending would probably be hit if the discretionary spending squeeze continues, but meanwhile the government's hearty "consumption" spending will continue to soar. Big benefit programs, including Social Security and Medicare, would devour more than 11% of the nation's output each year through 2002 to double the 1963 level. And when baby boomers retire, unless further changes are made, they could consume 20% of the national output.

Discretionary caps have been in place since 1990 and have held firm to date. The big question is whether discretionary spending caps imposed by this budget deal will hold in 2001 and 2002. But as the caps tighten, there will be more pressure to work around them. One work around will be so-called emergency spending bills like the $8.4 billion measure the Senate passed Thursday, May 8, 1997. Another ploy, mentioned in the president's February budget, would have devoted about $40 billion of new and increased user fees to offset discretionary spending.

 

-- Posted the week of May 12, 1997

Source: The Wall Street Journal The Outlook May 12, 1997 pg. A1