August 30, 2014

CONCORD COALITION WARNS AGAINST FISCAL YEAR 2000 SURPLUS GIVEAWAY

WASHINGTON -- With the budget process now underway, attention will naturally be focused on the projected budget surpluses for fiscal years 2001 through 2010. What cannot be forgotten however, is that unlike past years, there is a small, yet very vulnerable, $23 billion non-Social Security surplus projected for the current fiscal year.  The Concord Coalition strongly urges the Congress and the Administration to resist the temptation to treat this projected surplus as a pot of  “free money,” available to be spent on any number of supplemental spending requests.

 

            “Fiscal year 1999 was a milestone because the federal budget was balanced without using the legally off-budget Social Security surplus ¾ the first on-budget surplus since 1960. This was in keeping with the bipartisan pledge to leave the Social Security surplus alone. But the margin was a slim $704 million. In fiscal year 2000, keeping the “hands-off” pledge with regard to Social Security will require constant vigilance to protect the small projected on-budget surplus from fiscally irresponsible raids. While $23 billion is a lot of money in the abstract, it is only 1.3 percent of total projected spending in FY2000.

 

            As Congress prepares to consider, and perhaps increase, the Administration's supplemental spending request, The Concord Coalition urges that great care be taken to find real offsets wherever possible and to resist the temptation to pile non-emergency items onto legitimate emergency supplemental legislation. Today's projected surplus could all too easily be turned into a year-end deficit by September 30 ¾ an embarrassing development in the middle of the fall elections for those who have promised to “lock up” the Social Security surplus.

 

            The Concord Coalition understands that legitimate emergencies, such as natural disasters and military conflicts, will arise in fiscal year 2000, and that these will require a swift and effective federal response. In fact it is because such emergencies will arise, and by historic trends can be expected to cost between $2 and $6 billion in outlays by the end of the year, that appropriators must be particularly careful to not give away the surplus in advance on dubious “emergencies.”

 

            Given that emergency outlays have skyrocketed over the past two years from $3 billion in FY98 to $18 billion in FY99 and $28 billion (and counting) in FY2000, it's time to adhere to a strict definition of an emergency.  As defined by Office of Management and Budget guidelines and by last year's Congressional Budget Resolution, an emergency must be:

           

·         Necessary ¾ essential or vital, not merely useful or beneficial

·         Sudden  ¾ quickly coming into being, not building up over time

·         Urgent ¾ a pressing and compelling need, requiring immediate action

·         Unforeseen ¾ unpredictable or unanticipated

·         Not permanent ¾ temporary in nature

 

            Fiscal responsibility and saving this year's projected surplus dictate that emergency supplementals be held to this standard. It is important to ask whether each of the emergency supplemental requests submitted by the President or by Members of Congress meet each of the criteria. Can it be said, for example, that drug fighting activities in Colombia are “unforeseen,” “sudden,” or “temporary” expenses? Should routine defense operations be deemed an emergency simply because of a bipartisan desire to spend more on the military?

 

            The Concord Coalition believes that surpluses do not alleviate the need to make hard choices among competing priorities.  If an item is not a true emergency, it should be fully offset with actual spending reductions elsewhere in the budget. Credible offsets must be adequate to prevent larger than expected supplemental outlays.  Gimmicks, including rescinding funds that will have to be restored or canceling budget authority that was not going to be used, are not legitimate offsets.  The size of the surplus at year-end will be determined by comparing revenues with outlays, not with budget authority. 

 

            Will fiscal responsibility hold in the face of a projected surplus? So far, the signs are not encouraging. While The Concord Coalition does not oppose the President's proposal to use about $6 billion of the projected FY2000 surplus to undo some of the budget gimmicks from last year, the President has also proposed over $5 billion in supplemental requests.  Reports indicate that leading Republicans in Congress may want to spend even more of the surplus.

 

            When the dust settles from this burgeoning surplus giveaway, more than half of the projected fiscal year 2000 non-Social Security surplus may be spent by the end of March. This might not be cause for alarm if it could be said with confidence that there would be no further supplemental spending requests this year. But it would be ludicrous to assume that there will be no floods, hurricanes, earthquakes tornadoes, wildfires, or other natural disaster, and no further assistance needed for farmers or military conflicts for the rest of the year.

 

            In Concord's view, this year's surplus presents a test for both sides of the aisle:

 

            Many Democrats argue that the long-term projected surpluses should be saved to reduce the government's debt. Republicans respond that politicians will always spend a surplus and thus favor cutting taxes. Can politicians save a surplus?

 

         Many Republicans argue that discretionary spending can, and should be frozen, at least for one year.  Democrats respond that it is impossible to freeze spending even for a year.  Can politicians freeze spending for a year?

 

         How the parties deal with the fiscal year 2000 on-budget surplus will test their commitment to fiscal responsibility. The Concord Coalition challenges both to show that they will do that which they assert they can do by acting responsibly with this year's surplus.

 

         The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy.  Former U.S. Senators Warren Rudman (R-N.H.) and Sam Nunn (D-Ga.) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.