|Overview of R&D Trends|
| The FY 2003 Congressional Budget Process
“The process was not the best,
but we’re finally here.” Such was the assessment of Congressman C.W. Bill Young
(R-FL), Chairman of the House Appropriations
Committee, upon completion of the massive omnibus appropriations bill that
ended the FY 2003 congressional budget process more than four months after the
fiscal year had begun. Though offered specifically in reference to the
concluding omnibus bill, Chairman Young’s observation could just as well have
been said of the entire FY 2003 budget process. Kicked off in February 2002
with the release of the Bush Administration’s budget request, the FY 2003
budget process was marked by the failure of the House and the Senate to arrive
at a concurrent budget resolution, partisan squabbles over the wisdom of
deficit spending in which Democrats and Republicans continued to all but
reverse their historical positions on the issue, the paralytic effects of the
November 2002 elections that left little time or inclination for legislation,
and growing concern over the budgetary implications of a looming military
confrontation with Iraq. When President Bush signed the bill into law on
The FY 2003 budget
process was formally set in motion on
The Bush Administration also used the budget request to further its plan to resuscitate the ailing economy. By the Administration’s own admission, unemployment was too high, incomes were too stagnant, and business investment was too weak. Not surprisingly, President Bush’s proposal for “returning to economic vitality,” the third thematic priority accented in his budget request, centered on tax cuts. From the beginning of his administration, President Bush had made it a priority to reduce what he saw as an overly excessive federal tax burden on both individuals and corporations. Thus, in June 2001, at a time when budget surpluses were still projected to endure for several years into the future, President Bush signed a tax-relief package that was projected to lighten the federal coffers by $1.35 trillion over ten years. This despite the objections of congressional Democrats who argued that the legislation’s price tag was too large in light of deteriorating economic conditions and its benefits too skewed toward the wealthy. Then in October of that year, after the attacks of September 11 and after the publication of a Congressional Budget Office (CBO) report that showed a return to deficit spending to be imminent, President Bush put his support behind another plan to reduce taxes; this plan also contained provisions to increase unemployment benefits. This legislation came in at a more modest cost of $100 billion in FY 2002 and $159 billion over ten years. And, though the package narrowly won approval in the Republican-controlled House, it died in the Senate, where it received a cool reception from Senate Democrats who had retaken control upon Senator Jim Jeffords’ (I - VT) departure from the Republican Party in May. President Bush’s placement of an economic recovery plan predicated on tax cuts front and center in his FY 2003 budget request, therefore, signaled to his opponents that he was not about to abandon his cause.
In terms of the R&D content of President Bush’s FY 2003 request, the overall emphasis on national defense and homeland security translated into a healthy increase for the DOD’s R&D account, which was slated to rise by more than ten percent. R&D at the National Institutes of Health was targeted to reach the end point of its five-year doubling plan with a request more than 17 percent above the level enacted in FY 2002. Apart from these two agencies, however, the R&D picture was mixed. Among the eight remaining top-ten R&D agencies in terms of budgetary size, four were designated for increases in their R&D budgets while four were designated for decreases, with no discernible pattern emerging from the mix. For agency-specific analyses of R&D activity, see Chapter 3 of this publication.
Upon release of the Bush Administration’s request, action on the budget then moved to Congress where the annual ritual of agency officials testifying before appropriations committees in support of their agency’s request was renewed yet again. Normally, the information gathered during this process would then lead to passage of a concurrent budget resolution that sets forth budget totals and functional allocations that, in turn, guide the work of House and Senate appropriations subcommittees as they fashion the thirteen appropriations bills that fund the federal government. Given the divided control that held sway in Congress, however, the paths toward a budget resolution were quite different in the two chambers. On March 20, the Republican-controlled House passed a budget resolution along partisan lines that was largely consistent with the size and programmatic thrust of the Administration’s request. Noteworthy departures from the Administration’s request included $94 billion less in tax cuts over the ensuing five years and $4.4 billion more in highway construction funds in FY 2003. That same week the Senate Budget Committee reported a budget resolution to the Senate floor that offered its own take on President Bush’s request. While in agreement on defense spending, the Senate version of the resolution, backed by a slim Democratic majority in committee, made provisions to set aside an additional $1.3 million more than the House for highway construction, $2.5 million more than the request for special education, and $1.4 billion more than the request for local law enforcement, among other add-ons. In the end, the Senate version exceeded the House version by $10 billion.
Yet, while the Democratic members of the Senate Budget Committee had produced a budget resolution, their leadership failed to bring it forward for debate. Perhaps motivated by the opportunity to use a stalled budget process to draw distinctions between Democrats and Republicans over domestic spending priorities, or perhaps concerned about possible dissent within his own caucus, Senate Majority Leader Tom Daschle (D-SD) chose to withhold the resolution from consideration on the Senate floor. Thus, when the statutory deadline of April 15 for passage of a concurrent budget resolution arrived, no resolution was forthcoming and congressional appropriators were left to move forward without a common framework for spending and revenue policy decisions to guide them.
Thus, the budget process, such as it was, lurched forward. Apart from a consensus on defense spending, appropriators in the two chambers moved in different directions. Senate appropriators generally exceeded the presidential request and moved with relative haste, completing versions of each of the thirteen appropriations bills by the August recess. House appropriators, on the other hand, generally honored the more frugal presidential request and moved with greater deliberation, completing only three of the thirteen appropriations by the August recess. And, while genuine policy differences certainly played a role in hampering greater coordination between the two bodies, by this time electoral considerations were beginning to influence the budget process. The November midterm elections were quickly approaching and both Democrats and Republicans began to use the broken budget process as a campaign issue. For their part, Democrats charged that the Bush Administration’s request was insufficient to fund the nation’s diverse and growing spending needs, and that their vision – as evidenced in the Senate appropriations bills – was more in tune with current and emerging federal responsibilities. Republicans, on the other hand, cited the Democrats for both excessive spending and legislative mismanagement, pointing to the above-request Senate appropriations bills and the failure of Senator Daschle to deliver a budget resolution approved by the full Senate. Furthermore, some Republican strategists felt that passage of the remaining appropriations bills could even wait until after the elections. Given the expected coattail effects of President Bush’s high wartime approval ratings, Republicans felt retaining control of the House and wresting control of the Senate from Democrats was a distinct possibility. With Republicans back in control of both chambers, therefore, Republicans could shape the spending bills to their liking, despite the fact that such a course of action would take the process well into the new fiscal year.
Democratic and Republican differences also became manifest in renewed debates over the return of deficit spending. In this area, however, traditional party positions continued to defy historical precedent. In late August, the CBO issued its midyear budget forecast in which it estimated that the projected ten-year federal budget surplus had shrunk by 60 percent over a period of five months. As recently as March, CBO forecasters had predicted that the federal government would run a surplus of $2.4 trillion between 2003 and 2012. Now, in its August report, the CBO revised this projected surplus down to $1 trillion over the same period. CBO forecasters attributed this swing to a dramatic dip in tax receipts. Congressional Democrats pounced on these numbers, asserting that President Bush’s tax cuts were to blame and that any further tax cuts would only take the country farther away from its hard-won fiscal balance. Republicans countered that the decline in tax receipts was due to the ailing economy and that additional tax cuts were needed to stimulate the economy and, in turn, restore tax receipts by generating more economic activity. To drive this point home, the Bush Administration and Congressional Republicans then began to float the idea of making the June 2001 tax cuts permanent. The legislation that enabled these cuts had included a ten-year expiration date. This move only increased Democratic resistance and further jumbled the traditional positions of the two parties on the wisdom of deficit spending. Historically, Democrats had accepted deficit spending in order to free up funds for federal programs that the party saw as important. Conversely, Republicans had fought to curb deficit spending so that taxes could be cut and the size of government could be decreased. Now, Republicans were willing to live with deficits if they also resulted in lower taxes while Democrats were prepared to fight deficits financed by what they saw as tax cuts that unduly benefited the wealthy. Of course, even reconstructed Democrats agreed that some deficit spending was inevitable in the post-September 11 world, given the myriad diplomatic, legal, military, and rebuilding efforts that the terrorist attacks produced. Beyond this, however, Democrats’ willingness to tolerate deficits, at least rhetorically, grew increasingly thin while Republicans’ willingness to rationalize deficits became ever more frequent.
Despite the real policy differences that existed between congressional Democrats and Republicans, they were able to come together on the defense and military construction appropriations bills in October. Committed to supporting ongoing anti-terrorist military operations abroad and looking to shore up their national security credentials prior to the November elections, members of Congress approved a $355.1 billion defense appropriations bill and a $10.5 billion military construction bill. Notably, the defense bill did not include $10 billion in contingency funds to be used at the military’s discretion in anti-terrorist operations. Nevertheless, the legislation represented a $37.5 billion increase from the enacted FY 2002 level, not including FY 2002 supplemental appropriations. As it turned out, this was about the last significant legislative feat that Congress achieved before all of the House members and one-third of the Senate returned home to campaign for reelection. As a result, approximately one month into FY 2003, only two of the thirteen appropriations bills had been completed and most of the federal government was left to operate at FY 2002 levels on the basis of continuing resolutions.
The November midterm elections then changed the FY 2003 budget process and the national political landscape significantly. Largely on the efforts of strategically placed campaign stops by President Bush in support of Republican candidates, the Republicans retook the Senate by picking up two seats and strengthened their control in the House by adding six seats. Now in charge of the House, Senate, and the White House, Republicans were emboldened to move on those legislative items that had been brought to a standstill by a divided Congress, including spending bills. However, the election results notwithstanding, not all was unified in the Republican family. Even before the elections, there had been rumblings on the House appropriations subcommittee that funds the Departments of Labor, Health and Human Services and Education (Labor-HHS) that strict adherence to the president’s bottom line would harm some social programs important to Republicans members of the subcommittee. Republican discontent, as it turned out, was not confined to the Labor-HHS subcommittee. Other House Republicans also felt that congressional priorities had been made subservient to presidential priorities. Thus, when members returned for a short, lame-duck session of Congress after the elections, the requisite unity among House Republicans to continue work on the outstanding appropriations bills was absent. Moreover, Republicans would not formally retake control of the Senate until the new Congress was seated in January. In light of these circumstances, the Republican leadership chose to punt and take up the remaining spending bills in the new year.
By the time that
Republicans installed their majorities in both chambers of Congress in
January in the 108th Congress, new and emerging fiscal issues
were becoming increasingly prominent on the national agenda. By this time,
drought relief for the plains states, monetary relief for nearly all states
of the union facing severe budgetary deficits of their own, and the associated
costs of a looming military confrontation with
Beyond the sometimes
comically glacial pace of the FY 2003 budget process,
there are serious lessons to be taken from it. As long as the war on terrorism
remains salient, increasingly large shares of future discretionary spending
are likely to be devoted to national defense and homeland security. Moreover,
should military action against