Resolutions Not Worth Keeping

The FY 2003 Congressional budget plan is probably not going to be a resolution worth keeping.

In the last OMB Watcher, we reported that the House Budget Committee had approved a budget resolution on March 13. The full House passed the resolution on March 20. The House plan was billed as a "balanced" budget -- by using the more generous OMB budget assumptions (instead of the more conservative Congressional Budget Office numbers) and by not counting the cost of the so-called economic stimulus package. To balance the budget, in spite of the huge increases in defense and "homeland defense" and even more tax cuts, will require cutting domestic spending (almost everything the government does, except for defense and entitlement programs like Social Security). Excluding the increases in "homeland security," cuts to other domestic discretionary programs will be in the $17 billion range for next year and more than $82 billion over five years, according to the Center on Budget and Policy Priorities (CBPP).

The Senate Budget Committee budget resolution is only a little improved in terms of allowing for adequate domestic investment. Under the Senate plan, there would be slightly more money for education and other social programs during the next few years, but in the long term there would still be substantial cuts in domestic discretionary spending over the next decade. The Senate plan also requires a review of defense needs after 2004, rather than the House plan’s blanket approval of a $10 billion "defense reserve fund."

There is one big difference.

The House resolution would make permanent the huge tax cut passed in the spring, which is due to end in 2011. The Senate resolution does not. It requires next year’s Congress to come up with a plan to cut spending (even more) or raise taxes to insure that the Social Security surplus is only used for debt reduction. Unfortunately, the Senate failed to use the opportunity presented by the budget resolution process to go on the affirmative, and call for postponing the phasing in of the tax cut. Stopping the tax cut right now, when middle income Americans have already gotten almost all of their benefits from it, would save $600 billion in the next decade, according to the Center on Budget and Policy Priorities.

Stopping the tax cut, or at least postponing it, would allow us to meet the new challenges brought on by September 11, without cutting resources for the domestic investment that is fundamental to our domestic security and economic vitality. Providing kids with a good education, giving adults the job training and supports necessary to succeed on their own, undertaking important research and development, protecting the environment, improving transportation and water and sewer systems, strengthening the social safety net -- there are a myriad of important "investments" that will give us a return in the future, prevent the more expensive problems that will certainly result if we fail to take care of needs now, and allow us to meet the challenges of an aging population.

A resolution worth keeping would be to stop, or at least postpone the tax cut. No fingers need to be pointed. The budget picture changed after September 11 and the economic downturn. We can’t afford the tax cut right now, without huge and harmful reductions in domestic spending. As E.J. Dionne, Jr., writes in his Washington Post op-ed of March 26, 2002, it is time to "challenge the conventional wisdom on taxes" so we can accomplish the things that we all agree are worth doing. The Senate is still stuck on "saving" the Social Security surplus for debt reduction. What they don’t say is that "saving" the Social Security surplus is a purely rhetorical device that has little to do with saving Social Security and will be at the cost of the investments that benefit all Americans see this OMB Watch analysis for more details. Resolving to postpone the tax cut is the right thing to do.

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