The Three-Ring Budget
Stanley E. Collender, National Director of Public Affairs for Fleishman-Hillard

President Bush’s budget and changes in the economy have profound consequences for the nation, according to Stanley Collender. The Bush Administration budget, presented in detail on February 4, includes more spending and more revenue than any budget in U.S. history. The document predicts revenues that will exceed $2 trillion for the first time.

The president’s budget follows an economic downturn that has dramatically altered the money the government received from taxes. Instead of the predicted $313 billion surplus, there will be a $110 billion deficit—a $423 billion turnaround.

According to Collender there are several reasons for this turnaround:
 

• a weaker economy, which reduced revenue by $148 billion;
• higher appropriations, which added costs of $44 billion;
• technical changes (for replacing cost projections with actual costs), which added costs of $62 billion;
• the tax cut, adding $74 billion;
• interest payments, additional cost of $5 billion.

Collender predicts that the changes in the economy and the president’s budget have many consequences:

• a deficit (not a surplus),
• higher spending,
• much higher interest payments,
• no surplus without Social Security through the end of the decade or longer.

The president’s budget and the appropriation bills Congress will craft over the next several months will, for the first time in several years according to Collender, fail to address what had been predictable goals of the budget process:

• reducing the deficit,
• creating a unified budget surplus,
• creating a unified surplus equal to the Social Security surplus, and
• paying off the national debt.

One reason for the change in spending is the new focus on homeland security, a spending category that did not exist until late last year. A second reason is the need to revive the nation’s economy. The result, Collender predicts, is a budget that will increase spending in several categories. The biggest single increase in spending, according to Collender, will be interest on the debt. Over the next 10 years we will see $1 trillion in additional interest payments.

The spending increases, Collender believes, will be based on three key priorities for both the White House and Congress:

• defense,
• economy,
• reelection.

According to Collender, expect a year of bipartisan spending increases. Furthermore, he believes Congress will ignore the president’s relatively small increase in domestic spending (about 2%). He also predicts there will be insufficient votes for another tax cut.

Collender points out that Congress has very little time to complete the budget process. Between the day the president’s budget was available from the Government Printing Office (February 4) and Congress’ target adjournment date (October 1), there are only 109 legislative days. But when you subtract Mondays and Fridays (when Congress usually is in recess), religious holidays, and those days when members may be out of town for primary elections, there are only 65 days left.

Collender suggests that because of the few number of days left in the budget process, Congress would benefit from adopting a budget resolution. A budget resolution is a concurrent resolution of both the House and Senate that prescribes spending limits in the various areas of government activity. It is a blueprint or outline for spending that can accelerate the budget process once adopted. The president does not sign a budget resolution.

Collender has been involved in the congressional budget process for more than a quarter century. He is one of the few people who has worked for both the House and Senate budget committees. As director of Fleishman-Hillard's financial communications group he provides up to date analysis and information to clients on the federal budget and U.S. fiscal and monetary policy.