| 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 February 20, 2003 – some two weeks
after he had submitted his FY 2004 request to Congress – all parties involved
were left hoping that the FY 2003 process would soon be forgotten.
The FY 2003 budget
process was formally set in motion on February
4, 2002, when President Bush submitted his budget request to
Congress. Being the first budget request of the post-September 11 era,
the spending plan placed an expected emphasis on national defense and
homeland security. Indeed, two of the three overarching thematic priorities
highlighted in the request were “protecting the homeland” and “winning
the war on terrorism abroad.” Out of $765 billion in total requested discretionary
spending, $366 billion was to go to the Department of Defense (DOD) and
$25 billion was to be used for homeland security. Add to this another
$10 billion from the supplemental Emergency Response Fund, nearly all
of which was slated for national defense and homeland security, and these
two activities accounted for 52.4 percent of all requested FY 2003 funds.
In FY 2001 and FY 2002, these activities’ shares of discretionary spending
stood at 49.7 and 50.2 percent, respectively. Thus, the terrorist attacks
of September 11, 2001
continued to shift federal spending priorities noticeably in the direction
of greater military might abroad and greater and more coordinated security
resources at home.
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 Iraq
had crept in to the debate over FY 2003 spending, threatening to further
bog down the effort to bring closure to the process. At this point, both
the House and Senate leadership agreed that the speediest way to conclude
the process would be to wrap the remaining eleven appropriations bills
into one omnibus appropriations bill. Thus, as the release of the FY 2004
budget drew ever nearer, the House and Senate began the end game of drafting
their versions of an appropriations bill that would cover all agencies
of the federal government except for the Department of Defense. On January
23, the Senate approved a $390 billion version of the bill. Then on January
28, the House, by unanimous consent, decided to forego their
own version of the bill and move immediately to conference. Finally,
on February 13, both the House and the Senate approved a record $397.4
billion omnibus appropriations bill that spanned some 3,000 pages. President
Bush signed the bill into law on February 20.
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 Iraq
proceed, these shares will grow even larger as the deployment, combat,
and occupation costs associated with such action will be significant.
Additionally, Democratic and Republican positions on deficit spending
are likely to continue their evolution in directions counter to their
historical antecedents. In light of their strong ideological commitment
to lower tax burdens, Republicans will continue their defense of short-run
deficits in the name of long-run economic stimulus. For their part, Democrats
will solidify their position as the new defenders of fiscal balance, decrying
tax cuts as the chief threats to such balance. And, because the latest
CBO projections do not anticipate a return to surpluses until 2007, the
issue could evolve as a pivot point around which the two parties define
themselves with regard to the fundamental task of government to tax and
spend.
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