YES, THE DEFICIT WAS CUT

This is an impressive achievement, though you won’t hear about it from congressional Republicans. Still traumatized by the bruising fiscal brawl with the White House last year that sent their popularity plunging, Republicans are loath to trumpet even good news on the fiscal front. Instead, Newt Gingrich and other GOP leaders are brooding over their setbacks — on tax cuts, Medicare, and welfare — and seem eager to avoid the subject of the nation’s finances.

One notable exception is House Appropriations Committee chairman Bob Livingston, who has chronicled $ 16.3 billion in domestic spending rescinded by the 104th Congress for 1995 and another $ 23 billion for 1996. Livingston is urging his GOP colleagues to declare “a great victory on the budget.”

That is almost certainly premature. But he is right on one score: The Republican Congress must do more to advertise its historic first-year reduction of the deficit. If it fails in this, Bill Clinton will damn the GOP for the “drastic and mean spirited cuts” that made the budget improvement possible — while basking in the glory of a tamed debt. In reality, Clinton’s 1993 five-year budget plan had little to do with the steep drop in the deficit for 1996.

Six months after the 1994 elections but before the new Congress had had any impact on the budget, the Congressional Budget Offme predicted rising federal deficits for as far as the eye could see. The contrast with the CBO’s deficit projections based on the budget enacted by congressional Republicans in May 1996 is remarkable:

 

PROJECTED DEFICIT (in biilions)

The most important figures here are those for the first year. Largely thanks to congressional action, the 1996 deficit, it now appears, will be some $ 70 billion lower than the projected deficit the Republican Congress inherited. Over the entire seven years, the federal government will borrow about $ 1.1 trillion less under the congressional budget than it would have otherwise. That’s not chump change, even by Washington standards.

Just as critical, Republicans have now made a balanced budget by 2002 a holy grail. Any party that breaches the commitment does so at its peril. In fact, one of the central achievements of congressional Republicans and moderate Democrats was to change entirely the terms of the debate. Incrementally, they forced the White House, through what amounted to four successive Clinton budgets in 1995, eventually to endorse (at least rhetorically) a zero-deficit program of its own.

Why is the deficit falling so rapidly this year? For all the complaints about fiscal paralysis last fall and winter, the two government shutdowns and the series of continuing resolutions generated a bundle of savings for taxpayers. Notably, Congress capped most low-priority domestic programs at 75 percent of the previous year’s funding. Half way through fiscal 1996, federal outlays are $ 904 billion — a mere 2.9 percent above the $ 878 billion spent in the first seven months of 1995. Spending is growing at roughly half the pace of the previous 10 years.

One point warrants special emphasis: All of the increase in federal spending in 1996 over 1995 some $ 50 billion — can be accounted for by spiraling growth in just two programs, Medicare and Medicaid. There was no growth in total outlays for discretionary programs — the category that includes everything from Head Start to missile systems to the Popcorn Advisory Board. A few more years of this trend and nearly the entire federal government will have been converted into a gigantic health-care financing operation, funding nursing homes, HMOs, and veterans hospitals and little else of consequence. It’s hard to see how even hard core liberal Democrats can exult in their success at protecting Medicare when the effect is to squeeze out funding for everything else.

Clinton’s demagogic “Mediscare” campaign terrorized grandmothers in order to torpedo GOP Medicare and Medicaid cost restraints — and it left double- digit inflation in federal health care in place for another year at least. Even as the inflation rate for private medical care continues to plummet, federal health care costs are rising 12 percent again this year. If Congress’s Medicare and Medicaid spending limits had been enacted, federal outlays on healthcare entitlements would have been lower by $ 6.5 billion.

Meanwhile, Clinton’s vetoes of appropriations bills (amazingly, he claimed that Congress was appropriating too little money) led to compromises that will spend $ 5 billion more than Congress originally approved. Counting both appropriations and entitlements, Clinton’s impact on the budget was to raise outlays by $ 10 to $ 12 billion this year.

One other huge dead weight on the budget is out of the spending-cutters’ immediate reach: the quarter of a trillion dollars paid each year in interest on the national debt. If interest expenditures (which cannot be cut) and health care expenditures (which the president would not allow Congress to cut) are excluded, the rest of the budget has actually fallen 2 percent in nominal terms, or close to 5 percent accounting for inflation.

To be sure, the budget compromise that Clinton eventually signed into law in March was a major disappointment. The final deal with the White House was a far cry from the brash and visionary fiscal blueprint that House Budget Committee chairman John Kasich crafted just a year ago. Over time, that game plan was torn to pieces. No cabinet shutdowns. No burials of major obsolete, unproductive, or outright counterproductive, federal civilian programs.

The House Appropriations Committee recently released a list of more than 200 programs terminated, but they are mostly nickel and dimers: the $ 12.5 million Cattle Tick Eradication Program, the $ 4.3 million Nutrition Education Initiative, the $ 148,000 House Barber Shop, the $ 30 million we’ve been spending each year for Consumer and Homemaker Education, the $ 1 million for Native Hawaiian & Alaska Cultural Arts, and so on. Good riddance, for sure. But the savings total a meager $ 4.1 billion — out of a $ 1.6 trillion catalog of spending.

Lots of bigger fish got away. Some 18 months after the Republican victory, we are still appropriating funds for failed social programs such as the Legal Services Corporation and the Low Income Home Energy Assistance Program; for activities that politicize our culture in ways that many Americans find objectionable, like the National Endowment for the Arts and bilingual education; for corporate welfare, including the Export Import Bank, the Advanced Technology Program, and the Small Business Administration; for New Deal-era programs that lost their purpose a generation ago, such as the Rural Electrification Adminissration and the Tennessee Valley Authority; and for Clinton’s new crop of muddle-headed social initiatives, such as Goals 2000, intended to federalize public-school standards and curriculum, and the community policing program, which puts local police on the federal payroll.

We believe any program that was cut by at least 20 percent — as most of these were — is probably expendable. Why keep them on life support? They should be the first to go in the next round of budget cuts.

Unfortunately, that won’t be until next year at the earliest. In May, at the insistence of GOP moderates in the Senate, Congress approved a budget that balks at deeper cuts — and even restores $ 15 billion of spending, including many Clinton priorities. “That budget was a fiscal retreat from what we came here to accomplish,” grumbles freshman deficit hawk Mark Neumann of Wisconsin, who very nearly led a successful revolt against its passage.

Still, despite the strategic bungling and the backpedaling on the 1997 budget, the deficit is down sharply; federal domestic agencies are sweating out savings and are slowly shrinking for the first time in nearly a generation; and the White House has been backed into accepting a seven-year timetable for balancing the budget.

Conventional wisdom says Clinton won round one on the budget. And, yes, deficit hawks and fiscal tightwads have a multitude of reasons to be disheartened by the progress two years into the Republican revolution. But the pro-spending establishment in Washington may want to take another look at the scorecard. As a result of domestic spending cuts, the deficit is going down. Liberals may soon discover that they can’t afford many more victories like this.

by Tim Penny and Stephen Moore