Budget battle looms

Bush continues to stand behind some loopy surplus figures. But can the Democrats mount an effective counterattack?

By Jake Tapper

Published September 5, 2001 11:36PM (EDT)

At a Tuesday Oval Office photo op for the meeting between President Bush and Senate Minority Leader Trent Lott, Vice President Dick Cheney stumbled into a credenza, knocking over a couple of framed photographs. Cheney and Chief of Staff Andy Card quietly giggled; Bush and Lott ignored the noise altogether.

Such has been Bush's reaction as well to the commotion coming from House and Senate Democrats complaining about the vanishing budget surplus. On Aug. 29, the nonpartisan Congressional Budget Office reported that, due to Bush's $1.35 trillion tax cut and a slowing economy, the budget surplus -- apart from that set aside for Social Security and Medicare -- had vanished. Moreover, the CBO reported, the federal government would eat into $9 billion of the Social Security surpluses this year, something Bush had vowed not to do.

"There's been a lot of noise about the budget," Bush said today at the photo op, expressing the hope that the budget battles are free of "the old-style politics of trying to scare seniors ... What we need is fiscal discipline in Washington, D.C."

"There's a lot of money coming into the Treasury of the United States," said Bush. "Now, surely we can fit our desires and our appetites within those numbers without affecting the Social Security checks that go to the American people."

The problem, critics say, is that it's Bush's own desires and appetites -- his own proposed spending programs -- that don't fit within those numbers.

How effectively the Democrats will fight back in this, the first and perhaps biggest political battle of the fall, has yet to be seen. The Democrats, after all, have yet to determine what their strategy will be. The only given right now is that Bush will be faulted for basing his budget on calculations and projections that quickly proved about as stable as Anne Heche. "The administration is on a remarkable slide toward confrontation with reality," says Sen. John Kerry, D-Mass. "They seem to be either oblivious or frozen into inaction when the numbers tell a rather remarkable story. And they've been fudging the numbers and playing games with the choices in a way I think is only carving out problems down the road."

At first blush, the budget crisis can be seen as good political news for congressional Democrats. Not only has Bush broken his promise never to touch the Social Security surplus for non-Social Security matters, he's also all but assured that he'll break other promises in the future, as additional funding for at least some of his other high-priority campaign promises is gone: greater education funding, an additional $18 billion in defense spending, tax credits for his energy bill, a prescription drug benefit for seniors, Social Security privatization, a missile defense shield and changes in the tax code to increase charitable giving.

A problem for congressional Democrats, at least so far, is that they have yet to coalesce around any sort of solution. And each solution comes with its political risks.

"Stage 1 has been to get President Bush to acknowledge that this is a problem, and that we need his response," says a Democratic Senate leadership aide, referring to three recent letters to Bush from congressional Democrats, urging his attention to the disappearing surplus. "He hasn't acknowledged it yet. But then after Stage 1, it gets a little more complicated."

The complications arise, of course, in internal discussions about possible Democratic solutions to funding new programs in the face of the lost surplus. "I would 'stop the presses' right now," says Kerry. "I would pull people back and say, 'OK, we've got a problem here.' We need to put everything on the table." That means perhaps reshuffling some of the tax cut so that more of it is effective this year, Kerry says.

But whatever they decide on, "With a one-vote margin you have to have the president working with you," Kerry says. "We've got to try to bring the president to the table and make him understand that we can't go down this road."

But Bush's strategy seems to be to keep from the fray. "There is a new attitude in Washington, D.C.," Bush said Tuesday. "It used to be, 'Let's see how much we can spend.' Now it's going to be, 'Let's show the American taxpayer we can be smart with taxpayers' money.'"

But Bush's rhetoric doesn't square with the numbers. The Bush administration budget plan -- approved without the increases in spending for education and defense that he had requested -- was approved at almost exactly the level requested. Bush's budget for 2002 asked for $660.6 billion for discretionary spending; the House and Senate, then in GOP control, passed one that allocated $661.3 billion. So where's the money for additional spending going to come from?

"The message from Democrats to the president is: 'Your spending programs are in trouble, what are you going to do about it?'" says Chuck Fant, spokesman for the ranking Democrat on the House Budget Committee, Rep. John Spratt, D-S.D. "'Are you going to meet with Congress and bring people together like President Clinton did in 1997 with his budget battles?' He is the one that's got to show some leadership on this issue. They're his spending programs and he's got to step up to the plate."

Democrats are batting around other ideas. Democratic pollster Mark Penn is said to be testing the concept of a "trigger" mechanism, where the wealthiest Americans would not receive a tax cut unless the economy rebounds. At the same time, some in the House have been discussing a bill that would rescind the tax cut for the wealthiest 1 percent of Americans, reallocating those funds toward popular projects such as the education reform bill.

Some in the Senate actually talk about tightening their belts and passing 13 appropriations bills that work within the boundaries of the new, surplus-free budget, and not cutting into the Social Security and Medicare surpluses. The purpose, the Senate aide says, would be to essentially send a message that "We're keeping the promise" -- not to dip into the Social Security surplus to fund other programs -- "that you're not willing to." But, allows the Democratic Senate leadership staffer, "No one's in any hurry to raise their hand and volunteer to help Bush out of this problem he created -- one he won't even acknowledge exists."

This would be in keeping with the White House's spin that everything is fine as long as Congress doesn't go on one of its spending binges. "The president's budget makes plenty of room to fund vital government programs at a healthy rate of growth while still leaving a surplus," White House spokesman Ari Fleischer said Tuesday, going by the numbers and computations of Bush's Office of Management and Budget director Mitch Daniels. "The only threat to the surplus is if Congress would go too far and spend too much."

One reporter pointed out that even Daniels' highly imaginative calculations leave only $2 billion in surplus dollars this year -- "That's not a lot of wiggle room," the reporter noted, "and it sounds like you're saying my way or the highway; either it's my priorities and Congress really doesn't get a share in saying what to do with that tiny extra surplus. And if they step over the line, it's their fault."

"'Not a lot of wiggle room' means that Congress has a fiscal straitjacket imposed upon itself," said Fleischer, former spokesman for the House Ways and Means Committee. "Not a bad outcome."

The White House's disdain for Congress is odd considering Congress has given Bush everything he's asked for so far: a budget blueprint, a tax cut and two emergency spending bills. But Bush is clearly making this out to be a battle against Congress.

Not even a battle, really, as that word connotes some engagement. More like a presidential-level "talk to the hand."

On Aug. 15, Spratt, House Minority Leader Dick Gephardt, D-Mo., Senate Majority Leader Tom Daschle, D-S.D, and Senate Budget Committee chairman Sen. Kent Conrad, D-N.D., wrote to Bush, noting that "just over six months into your term in office, nearly two-thirds of the non-Social Security, non-Medicare surplus projected for the next 10 years has been wiped out -- and that has happened before a single one of next year's appropriations bills has been signed into law." By the end of the month, if the projections from CBO and OMB were as anticipated, "We face the very real prospect that your tax cut, coupled with an economy that has been slowing significantly, will have exhausted all of the surplus in the near term and leave no way to fund other functions of government without tapping into Medicare and Social Security trust funds."

The four Democrats never heard back from Bush.

They sent another letter on Aug. 22, after the OMB issued its fiscal report, stating that "your budget has spent all of this year's Medicare surplus. Only by changing the accounting practice that has been used for more than 65 years to calculate Social Security revenues were you able to make it appear you had not invaded the Social Security Trust Fund surplus as well.

"You cannot insist on tens of billions of dollars of spending that wasn't included in the 2002 budget and then insist that we stay within that budget," the Democrats wrote. "Mr. President, these are serious problems. We cannot paper over them with rhetoric, accounting tricks, and aggressive assumptions about future growth."

Again, there was no reply.

On Aug. 29, when the CBO numbers came out indicating that Bush's budget was going to eat into $9 billion of the Social Security surplus, the four Democrats wrote to Bush again, "for the third time in as many weeks." They noted the additional spending initiatives proposed by both Bush and congressional Republicans, including the prescription drug benefit for seniors, $18 billion in additional defense spending, an additional $28 billion for the Children's Health Insurance Program and on and on.

"Although you continue to advance these proposals, your Administration has failed to put forward any plan to reconcile their costs with the rapidly dwindling surplus," the Democrats wrote, requesting an audience to discuss the matter.

After some back and forth -- and sniping between spokesmen -- the White House set up meetings for the president with Daschle on Tuesday and Gephardt on Friday.

("The president has again reassured me that it is not his desire to use Social Security trust funds," Daschle told reporters after the meeting. "We look forward to working with him and seeking his guidance on how we avoid using Social Security trust funds.") But more important meetings will come Wednesday afternoon, when Daschle convenes with Senate Democrats to discuss strategy on this issue, one that no one had planned on having to fight in the previous era of Brobdingnagian surpluses. Gephardt will meet with the House Democratic leadership Wednesday evening, and the entire caucus on Thursday morning, to discuss such strategy.

Anticipating Democratic attacks, Bush said Tuesday, "I understand how politics works up here. There's always that scare tactic, trying to tell the American people that the budget process is going to lead them to not get their Social Security check. That's just ridiculous. It's just not right."

And he's right, the Democratic National Committee has already begun to slam Bush in TV ads.

Then there was this e-mail alert, sent out Tuesday: "They're trying to delay your tax cut, and raid Social Security and Medicare, so they can fund more wasteful Washington spending. And these Democrats who (for years) supported budgets that spent all Social Security money and left no surplus are now launching partisan, misleading attacks on President Bush."

This scare tactic -- correct in its denunciation of Democrats for having freely spent from the Social Security surplus for years -- is from Jack Oliver, Bush's handpicked deputy chief of staff at the Republican National Committee.

"Bush has walked away from his responsibilities," Kerry says. "The question is, is the media going to hold them accountable for that? We're certainly going to."

But how they're going to try to do that has yet to be decided.

Jake Tapper

Jake Tapper is the senior White House correspondent for ABC News.

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