I guess President Bush was paying attention during all those corporate scandals. After all, his latest budget strategy is pure Enron: If you leave $87 billion in spending out of the budget, the rest of your balance sheet will look a lot better—at least until the bill comes due. Investors learned this the hard way from Enron, which hid billions of dollars in liabilities on off-balance-sheet partnerships. The president has also been inspired by those companies that take “nonrecurring” charges against earnings for unforeseen, unplanned events—an acquisition, a plant closing, excess inventory—over and over again. Between 1999 and 2001, woebegone Motorola took such charges in eight straight quarters. While presidents have done this on a small scale for years, President Bush is using supplemental spending to fund his most cherished initiatives.
The importance of dealing straightforwardly with stakeholders has not yet caught on in Washington, as the president demonstrated with his request for an additional $87 billion to fund operations in Iraq and Afghanistan.
With the administration’s encouragement, Congress will consider the request as a “supplemental” spending bill—in other words, as funds to be spent on top of whatever it approves for fiscal 2004. At a time when deficits have suddenly re-emerged as a campaign issue, this distinction is important because it enables the president and Congress to continue their charade of fiscal discipline. As Chris Edwards, director of fiscal policy at the Cato Institute, notes, it has become a kind of game. Every year the administration announces it will hold discretionary spending to a 4 percent increase, and every year the Bushies and Congress gleefully ignore their vow.
According to data from the Congressional Budget Office, which can be found here and here, discretionary spending—the portion of the budget spent on everything except Social Security, Medicare, and Medicaid—rose 13 percent in 2002, 12.5 percent in 2003, and is slated to rise 7.6 percent in 2004. The increases can’t simply be blamed on the war on terror. The same reports show that discretionary, nondefense spending rose 12.3 percent in 2002 and another 8.5 percent in 2003. In its August budget outlook, CBO suggested nondiscretionary spending would rise another 7 percent in 2004.
Spending is rising so rapidly largely thanks to the chicanery of supplemental budget requests, through which the president has proposed spending more than $150 billion on the war alone. Budget resolutions cap discretionary spending for a given year. So when needs arise midyear, Congress passes emergency or supplemental appropriations. But like Motorola’s perennial charges, supplemental requests—which are theoretically one-time events—have emerged as a way for presidents (not just this one) and Congress to bust the budget while sticking to the projections they present to the public. In the 1990s, according to this CBO study, there were 19 supplemental appropriation laws—or about two per year. The annual totals ranged from $48.6 billion in 1991 to $4.5 billion in 1996, and the measures funded everything from the first Gulf War to relief from hurricanes, earthquakes, the Los Angeles riot, and the Oklahoma City bombing in 1995.
Of course, it’s difficult to calculate how much it will cost to respond to a sudden emergency or to a contingent event like a war. But not all “emergency” spending deals with unforeseen emergencies. Throughout the spring, as debate on the latest tax cut package heated up, the administration continued to act as if efforts in Iraq wouldn’t require any more funds beyond what had already been requested for fiscal 2004. Would Congress have approved the tax cut if it actually had to pass an honest budget—one that raised discretionary spending by more than 10 percent just to pay for the war?
By failing to include war spending as part of regular budget requests, says Robert Bixby, executive director of the Concord Coalition, “It makes it sound as if it fits within some sort of overall budget plan.” Of course, it doesn’t.
Congress will surely approve the $87 billion request—without offsetting the expenses with cuts in other programs. In doing so, it will increase the mammoth national debt by $87 billion, or more than 1.3 percent, and increase nondiscretionary spending by at least 10 percent above 2003 levels. And that’s before taking into account the other substantial increases that are already planned. Just because the spending is supplemental doesn’t mean we don’t have to pay it back.
The process of exceeding spending caps with supplemental measures is a little like an overweight person going to a dietitian and dutifully agreeing to adhere to a strict daily intake of 1,800 calories in three meals—and then eating a supplemental cheese steak to feed the emergency hunger pangs that set in every afternoon. And then charging the food to his kid’s credit card.