Declining Surplus Could Be Election Issue

WASHINGTON – Republicans and Democrats are bracing for an election year filled with finger pointing as dwindling federal surpluses drain the money each party craves for its priorities.

Government and private analysts expect anything from a tiny surplus to a roughly $40 billion deficit for fiscal 2002, which began Oct. 1. That is an abrupt turnaround from the $313 billion surplus the nonpartisan Congressional Budget Office projected last January.

Even worse numbers loom for next year. Already, White House budget chief Mitchell Daniels has predicted deficits through at least 2 the first since 1997.

Combined with probable gridlock between the Democratic-run Senate and President Bush and his allies in the GOP-led House, this leaves neither party with enough money or muscle to ram costly initiatives into law. Sizable tax cuts, prescription drug benefits, expanded health care coverage for the uninsured and large new education programs all seem suddenly unachievable.

"Those are the dreams of yesteryear and the promises for the campaign, but they won't see the light of day legislatively," said Robert Reischauer, a former CBO director and president of the liberal-leaning Urban Institute.

That's not to say there won't be bipartisan pressure to drive up spending. That will be fed by a confluence of factors: the election year; the popularity of education, defense and anti-terrorism programs; a desire to spur the economy; and the expiration of a decade-old budget law that helped cap spending.

Even so, eyeing next November's elections that will determine control of Congress, both parties will duel over who is to blame for the worsening budget picture.

"We are headed back into deficits because of the very serious budget mistakes we made this year," said Senate Budget Committee Chairman Kent Conrad, D-N.D.

His comments, a preview of next year's Democratic theme, referred to the $1.35 trillion, 10-year tax cut that Bush pushed through Congress last spring over most Democrats' objections.

Republicans say the culprit is the weak economy, further staggered by the Sept. 11 attacks. But in a warmup for next year, they spent recent weeks blaming Democrats -- particularly Senate Majority Leader Tom Daschle, D-S.D. -- for killing bill after bill for political reasons.

"We take up politics when it comes to the Senate," as opposed to policy, House Speaker Dennis Hastert, R-Ill., said last week.

Bush will unveil his $2 trillion-plus budget for the 2003 fiscal year by early February. Republicans expect it to propose healthy increases for defense, domestic anti-terrorism initiatives and education.

But, eager to avoid falling deeply into deficit, the administration is expected to carve savings out of lower-priority programs. Many congressional Republicans might be nervous about supporting austere cuts in an election year, forcing them and their leaders to choose between backing Bush or risking re-election and the GOP's drive for congressional majorities.

Democrats also face divisions. Conrad and others want to stick to the party's theme of fiscal prudence it honed under former President Clinton -- an insistence on not spending Social Security and Medicare surpluses on other government programs.

But that means even less money available for such other Democratic priorities as health care coverage, schools and public works construction. An election-year splurge on such programs might prove irresistible for many Democrats, especially liberals.

Further Democratic splits are possible over proposals to block some of last spring's tax cuts on the wealthiest individuals, which don't take effect for years. Repealing the cuts would free money for Democratic priorities, but open Democrats to campaign-season GOP accusations that they want to raise taxes.

Assuming Conrad can resolve those Democratic divisions and move a budget through the Senate, it will differ markedly from the House's Republican-written version.

Many on Capitol Hill think Congress will not pass a final budget next year. Without the overall limit that budgets impose, the only control on spending will be Bush's veto threats -- assuming Republicans back him up.

It also means that proposed GOP tax cuts will lack the procedural advantage a congressionally approved budget can provide -- the ability to pass the Senate without being vulnerable to filibuster.

Lacking that protection, a Republican tax cut will need 60 votes to pass the 100-member Senate. Democrats will likely have little trouble mustering the 41 votes to deny it.