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The 1990 Budget Summit: Promises Are Failing to Materialize
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19544 |
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Section : |
CURRENT ISSUES
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| Issue
Date : |
11 / 1991 |
3,224 Words |
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Scott A. Hodge
Scott A. Hodge is the Grover M. Hermann Fellow in Federal
Budgetary Affairs at the Heritage Foundation in Washington,
D.C. |
With great fanfare, one year ago this month, Congress passed the Omnibus Budget Reconciliation Act of 1990 (OBRA), the product of six months of often contentious negotiations between congressional leaders and the White House. These negotiations began as an attempt to avert an expected $175 billion budget shortfall for fiscal 1991, which, if not corrected, would have triggered $100 billion in automatic spending cuts as required under the Gramm-Rudman-Hollings deficit reduction law. Fearing this possibility, summit negotiators settled upon what they claimed to be a five-year budget package that would trim future deficits by a cumulative total of $500 billion.
Supporters of the budget accord claimed that all of this would be accomplished during the next five years by increasing taxes by $137 billion, cutting $290 billion in future federal spending, and enacting tough spending enforcement rules to protect the integrity of the deal. As a result of this action, it was predicted, the federal government would enjoy a $156 billion deficit in fiscal 1991, a $150 billion deficit in fiscal 1992, and a $23.5 billion surplus in fiscal 1995, though these--like all of the figures below--exclude the unpredictable one-time costs of the savings and loan bailout and the costs of operations Desert Storm and Desert Shield.
One year into the budget deal, things do not seem to be going as planned. Example: at the time of this writing, the deficit for fiscal 1991 is projected to top $223 billion, $67 billion higher than the summiteers agreed to; the deficit for fiscal 1992 is now projected at $214 billion, $64 billion higher than the summit's prediction; and, the deficit for fiscal 1995 is projected to be $118 billion, $142 billion higher than the summit's expected surplus. Once again, these figures exclude the one-time costs of the S&L bailout.
Any reasonable discussion of the budget and deficits should exclude the S&L bailout costs from the reported calculations. The first reason is that these costs have become a highly variable "moving target," and the second reason is that they have been used for budget gimmickry. For example, the snapshot taken by OMB in early 1991 of the 1992 deficit was $280 billion; $88 billion of which was S&L cost related. By August, this $88 billion estimate had grown to $118 billion and, consequently, the deficit projection rose to $348 billion. The reason: the Resolution Trust Corporation (RTC), which administers the S&L bailout, will spend $30 billion less than anticipated this year and, thus, would have to spend $30 billion more than was expected next year. Taxpayers will still have to cough up that $30 billion
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