BUDGET BATTLE
September 4, 2001

Congress returns from summer recess to tackle spending bills, and, some say, to spar with the president over his budget policies. Background: Discussion:

 

Online Specials At the Capitol Budget and Tax Cuts Aug. 21, 2001: A look at the shrinking budget surplus July 27, 2001: Will the tax cut revive the economy? July 12, 2001: The shrinking surplus May 29, 2001: Explaining what consumer confidence really is. May 28, 2001: Explaining the tax cut May 25, 2001: Finalizing Pres. Bush's tax cut March 2, 2001: Behind the budget surplus Feb. 28, 2001: North Dakota Democrat Sen. Kent Conrad on the Bush budget Feb. 27, 2001: A report from Capitol Hill on the effort to push President Bush's budget plan Browse the NewsHour's coverage of Economy, Congress and the White House   Office of Management and Budget Economic Policy Institute House Budget Committee U.S. House of Representatives U.S. Senate	JIM LEHRER: We get analysis from Tom Oliphant of The Boston Globe and David Brooks of The Weekly Standard. Tom, everybody seems to be predicting a major confrontation coming now between the president and Congress over all these money issues. How do you see it?
	The Social Security question
	TOM OLIPHANT: Well, I don't think it's going to happen right away. I mean people forget in the midst of all this noise that Congress has only taken the first step toward enacting five of these thirteen or fourteen appropriations bills; the others are still in very early stages. This thing is at least a month away. JIM LEHRER: Now this is money that's required to keep the government operating after October 1. TOM OLIPHANT: That's right. JIM LEHRER: Right. TOM OLIPHANT: The programs that are subject to annual appropriations -- so that process has to unfold for there to be an actual confrontation. I think there will be a lot of debate. I think the economy figures in the background but this will take time to develop until some moment when the passage of an appropriations bill -- call it X -- threatens to actually dip in to the Social Security funds, which not only President Bush but just about every member of Congress promised not to do. Short-term that would be the moment. But I don't see it coming right away. JIM LEHRER: Is... Do you see that being the moment, whenever it comes, David, when Social Security suddenly becomes something everybody is talking about? DAVID BROOKS: Yes. Then the question becomes do we call the bluff of this thing called the Social Security trust fund. We're running $150 billion surplus this year. We all bow down and worship at the beast of this fiction called the Social Security trust fund -- even though no matter where the money goes, into the government - whether you call it Social Security or anything else -- it goes into pay off the debt if it was in surplus. If it was a rational country, we would debate should it go to pay off the debt, should it go to education, defense, anything else. But we're not in a rational country; we're in a world, which worships this separate $150 billion block. So all the money as the rules are now written will go to pay off the debt. There's a teeny, tiny little puddle left for everything else. And there will be this intense pressure to dip into that big money.
	Pressure from both sides
	JIM LEHRER: Where will that come from? Where will the pressure come from? DAVID BROOKS: It will come from both sides because both sides have other priorities. I think at the end of the day they are going to dip into the money because some people want defense, some want education spending, some want a farm bill. I think we're in for, you know, a couple months of furious political posturing finished by a week of craving political back scratching where they all come together and say we've found a way in the lock box, we're going to fund education, we're going to fund this. We're all happy. TOM OLIPHANT: There's an exquisite irony here, however, and the exquisite irony is that the pressure to spend is going to come initially, I think, from President Bush because he's the clearest on the record as wanting stuff that goes beyond the budget resolution as we know it now. There's one item already on the table: $18 billion more for the military in the coming year, even in the absence of a new posture for the future, which would cost even more. And the margin is so tiny that even that takes you into this fund. And the second thing, which President Bush also wants is money over and beyond what is currently budgeted for education. JIM LEHRER: What do you say to David when he says, well, this is all posturing about Social Security. Both sides are going to do it. It's just an issue. It's a debate issue rather than a real issue. TOM OLIPHANT: Well, on one level, David is absolutely right. The effect on me and you of this is infinitesimal right now. I think part of the problem, however, that comes when you think about the next few years, if this continues -- if the economy doesn't recover quickly, then you're talking about using perhaps a half trillion of Social Security and Medicare money. And now at a half trillion I guess you get people's attention in Washington so that the trend... it might start small but it threatens not only to become enormous but to blot out the hopes, ironically, of both parties. There is a conservative agenda in Washington now that involves the expenditure of money as there is a progressive one. And each, I think, are hostage to these deteriorating finances. DAVID BROOKS: In some way what we're seeing is a precursor for our lifetime of budget fights. In 1970 when there were lots of spending programs Social Security and Medicare took up 3 percent of GDP. Now it's approaching 10 percent. By 2030 it will be 13 percent. That means that these programs are swallowing up the entire federal budget. There's no money left over for anything else. If you're alive -- hopefully we'll all be alive the next 40 years -- there will be no big spending programs because the money simply won't be there and we're just beginning to see that right now. I would love to see Bush though take on the Social Security trust fund, explain to the American people I'm going to pay down the debt, not as much as I wanted to but I'm a new kind of Republican and we're going to have defense increases because we need it. We're going to have education spending because we need it. I'm touching the third rail. The Social Security trust funds are just an accounting fiction.
	Social Security and the economy
	JIM LEHRER: What about the politics of that? Can he do that? DAVID BROOKS: Well, the Democrat and many Republican pollsters say if you get into the raiding Social Security trust fund, that is political death. Republicans are good at cutting taxes. Democrats are really good at targeting people who touch the Social Security trust fund. So they do think it's death. And right now you look at the Bush approach and they think we can't explain to the American people; we can't explain that it's a fiction. It's too complicated so we're just not going to touch it. TOM OLIPHANT: There is another problem here though. JIM LEHRER: You don't think it's a fiction for one thing, right? TOM OLIPHANT: Well it's not. David makes an appropriate point on substantive grounds -- I think as an economic or financial point he's essentially accurate. But going back on a promise that has the word "Social Security" attached to it is a big deal politically, we agree. I think it's also a big deal substantively though because when you begin to play with the government's credibility on fiscal matters, then you get into situations that could create economic problems, for example, an effect on interest rates down the road, so that this is a decision that is not without consequence and I think it explains the president's strategy right now, which is just pass the appropriations bills, Bush won -- campaign song -- every rally right, don't worry, be happy. The economy will come roaring back in the spring and this will all... we'll all forget this. JIM LEHRER: Let's talk about the economy for a moment. We heard what Senator Conrad said -- there needs to be a rescue plan, and Senator Domenici, a Republican sitting right next to him said we really shouldn't be talking about this; we should be really talking about economy. Is that going to eat all of this political energy up? DAVID BROOKS: This is the subject that the Bush administration hopes to change the subject to. The Republicans and the Democrats on the Hill will be a bunch of cranky accountants debating surpluses, lock boxes, all that kind of stuff, and Bush will be out in the country saying let's not worry about the surplus, we have got to stimulate the economy. The question becomes what do you do? The Democrats have left themselves relatively little room by saying we've got to protect these surpluses beyond all else. The Democrats have a traditional or the Republicans rather have a traditional amount of things they can do to stimulate the economy. There's the energy plan. There's the capital gains cut, which they all love talking about if they can find anybody who has capital gains this year, which I doubt. But there's a series of tax measures and other things that they will talk about. So Bush is going to try to change the subject from the budget deficits in accounting to the things that really matter to people.
	The economy's political impact
	TOM OLIPHANT: There isn't a lot of evidence that capital gains taxation is a matter of intense conversation among the great mass of the American people. But.... DAVID BROOKS: It is at my country club - TOM OLIPHANT: But the concern that you're talking about is real. Here I think it's interesting that you see a little bit of a different perspective from the Republicans in Congress, like Trent Lott or Dennis Hastert, the House speaker. Even Pete Domenici, who today indicated some real skepticism about whether the economy -- given current policy -- is going to be coming back. Republicans who are facing the voters next year; you get some pressure to do things. It's interesting, I think, at least on day one that Bush is pushing back against that a little bit. I hear what David has been saying, but that is not what President Bush is saying. JIM LEHRER: What do you think he's saying? TOM OLIPHANT: He's saying we've got it all in place. We did the tax cut. We have the building blocks of prosperity in place. If you will just please be patient, everything will be fine in the spring. JIM LEHRER: Isn't there a huge political shadow over all of this, David, and what happened to President Bush's father President Bush after... during his first term when he didn't get a second term largely because he didn't understand the economy, he was turning sour for so many people. DAVID BROOKS: We've all gone Oedipal in the last week. On the one hand, we're talking about Bush and his father. On the one hand.... JIM LEHRER: That was a question, David; that wasn't a comment. DAVID BROOKS: Bush's father lost on the one hand because he broke this pledge -- the tax pledge; in the younger Bush case the Social Security pledge. So he doesn't want to break that pledge. On the other hand, Bush's father loss because the economy went sour so maybe Bush shouldn't stick with the fiscal rectitude of the pledge. He should do something to help the economy, so he's stuck on two father figures. It's Freud who is just crushing the guy. JIM LEHRER: Freud is crushing the guy, Tom? TOM OLIPHANT: No, I don't think it's Freud. I think it's reality. Pete Domenici -- if I could try to be nonpartisan by citing a Republican -- the concern is that the slowdown we've seen in the past year is spreading worldwide. And accordingly there's no engine for growth in the world right now and that there is not a very robust climate for business investment, that it will continue and that we're stuck with our current policies. JIM LEHRER: All right. We have to leave it there. Thank you both.