Bush Seeks to Slow Flow of Spending

WASHINGTON —  The budget deficit has been eliminated. Washington is looking at massive surpluses as far as the eye can see--the biggest piles of cash the federal government has ever accumulated.

And at precisely this moment of plenty, President Bush is trying to abruptly tighten the spigot on government spending in all but a few key areas.

Bush aims to scale back the growth of federal spending to the point where some agencies and departments may not receive increases large enough to keep pace with inflation, administration and congressional sources say.

Those bridling at the Office of Management and Budget’s proposed spending levels include the departments of Energy, Justice and State, sources close to the process say.

“The basic word is, defense and education get a lot and everything else is held to the rate of inflation and below,” said Steven Moore, president of the Club for Growth, a conservative political action committee with close ties to the administration.

This drive to limit federal spending poses a stiff test for Republicans in Congress--where both parties, in recent years, have spent with abandon. Bush, hoping to thwart that trend, is testing the proposition that spending can be squeezed at a time when the federal treasury is awash in surpluses. Every previous effort to cut spending in the last 20 years has been justified by the need to reduce the deficits.

Bush aides say that spending has to be restrained so that the surpluses, which may prove temporary, do not produce a permanent increase in government’s size and scope.

“You don’t have the argument of the deficit anymore, so you are left at base with the philosophical argument: Are you going to allow the size of government to grow just because the economy is growing?” said one senior Bush advisor.

Even many conservatives are pessimistic such reasoning will prevail. Compounding Bush’s problem, most Democrats believe the real reason he wants to limit spending is to pay for his proposed tax cut, which would cost at least $1.6 trillion, and possibly more than $2 trillion, over 10 years.

“I think they are at the point where they have discovered, though not revealed, that they cannot do their tax cut . . . without going into the Medicare and Social Security surpluses,” said Gene Sperling, National Economic Council director under President Clinton.

Clearly sensitive to the charge that their tax cut would deplete those programs for the elderly, Republicans on Tuesday pushed through the House “lockbox” legislation designed to make it more difficult to spend Medicare and Social Security surpluses. The Bush administration initially resisted including Medicare surpluses in the “lockbox” because the president wanted to tap that revenue to help pay for a new prescription drug benefit; Republicans said their bill would not prevent that.

Though Bush will not finalize his budget until late this month, congressional and administration sources say he is seeking to limit the growth of the government’s discretionary spending to 3.5% to 4%. Final appeals from Cabinet agencies could slightly raise that figure, insiders say. Still, that’s far short of the 8% growth Congress approved last year.

Nor would the proposed gains be evenly distributed. Bush has already carved out modest increases for defense, education and medical research. That means to hold down the overall number, other areas may lose ground or tread water.

“In order to provide room for the initiatives the president has proposed . . . that will require you to eat into the remaining areas of the budget,” said the Bush advisor.

As one example, administration sources say Bush has been forced to scale back his promise to significantly increase funding for community health centers that provide care to the uninsured.

Even the budget for defense has generated grumbling on Capitol Hill. After relentlessly accusing Clinton and former Vice President Al Gore of under-funding the military, Bush is proposing an increase in defense spending for next year no larger than the $14 billion Clinton requested. Conservatives, and many in the Pentagon, expected more.

That’s led to complaints from defense advocates in Congress--most notably the head-turning spectacle on Monday of Sen. Joseph I. Lieberman (D-Conn.), Gore’s running mate, accusing Bush of slighting the military to fund his tax cut.

“It crowds out most everything else, including the kind of defense spending increases that the president and the vice president themselves called for during the campaign,” Lieberman said.

Indeed, once Bush releases his budget, Democrats are expected to loudly make the case that the tax cut would drain revenue from a host of popular priorities.

They already are warning it will be particularly difficult to provide a Medicare drug benefit this year if the tax cut were fully enacted. Prospects for action on a drug benefit dimmed significantly when Bush’s own proposal--for grants to states to help only low-income elderly--was greeted with a cold shoulder from both parties in Congress.

Administration officials staunchly reject the argument that the tax cut is driving their budget policy. Bush advisors insist that the $3.1-trillion surplus projected for the next decade provides enough money to fund the tax cut, fulfill key campaign promises and provide for modest increases in discretionary spending.

Still, holding the line on discretionary spending won’t be easy with so much money pouring into the treasury.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said he thinks Congress can meet Bush’s tighter targets, but he acknowledged it would require more discipline than legislators have demonstrated in recent years.

“It’s very hard,” said Domenici. “There was more of an emergency mentality when you had big deficits and people were willing to take a look at tightening belts.”

Others note that Bush added to his challenge by failing to make a case for spending austerity during the campaign; while he criticized Gore’s proposed new spending, he rarely suggested he would roll back existing programs. “Unlike Reagan, Bush didn’t run on a slashing-government platform,” said Robert Bixby, executive director of the Concord Coalition, a fiscal watchdog group. “He ran on being the compassionate conservative, which is not a mandate to slash government.”

Overall, this year’s basic alignment--with Republicans pressing for the maximum tax reduction and Democrats defending social spending--carries echoes of several past budget showdowns.

But in two respects, this year’s debate could be very different.

One is that Democrats--after watching Bush successfully tag Gore during the presidential campaign as the candidate of big government--are leery of portraying the options as a choice between tax cuts and spending. Instead, they may primarily try to paint the tax cut as fiscally irresponsible and a danger to the goal of paying off the national debt.

The other change is that congressional Republicans in recent years have spent money almost as exuberantly as Democrats. Some GOP lawmakers are hopeful Bush’s presence in the White House will rein in that impulse. But they acknowledge that a big part of the pressure for more spending comes from bipartisan sources in Congress.