How to Read the Bush Budget

The strategic leaks have begun about what will be in the President's budget when it appears in a month or so. This is a period when the White House will use every day to create managed news on some aspect of the budget or the State of the Union address.

From today's Times story, (Bush's Budget for 2005 Seeks to Rein In Domestic Costs), it's obvious that the topline story the administration wants to put out is just that: reining in domestic spending. This is a way of appealing to their own conservative base that is upset about the deficit and lack of restraint, and also a way of showing, at least on paper, that they can afford some of the additional spending, mostly through the tax code, that they will propose.

All I've read so far is this story, so I don't have many specifics to go on (neither does anyone else). But as this month of strategic leaks begins, it's time for a reminder that presidential budgets are political documents -- they are not actually guides to what the government will really spend in the next fiscal year. And to understand this one as a political document, here is a brief guide to the four different kinds of cuts that will be in play.

First, there will be some real cuts to programs whose congressional defenders are out of power and whose beneficiaries are not swing voters. An example from the Times story is probably the the President's proposal to restrict the number of housing vouchers available through local housing authorities. Twenty-three years ago, Reagan's budget director David Stockman drew a distinction between "weak claims" and "weak clients," promising to attack weak claims and protect the politically weak who had a strong claim to help from the government. Stockman didn't exactly keep that promise, but still, we look back at the Reagan years nostalgically now. There is no longer even a pretense of protecting those with a strong claim; this is all about going after those too politically weak to defend themselves, whether they need housing or not.

But these programs have all been cut plenty, and there isn't much more room to cut the weak without running into what they want to avoid, which is, according to the article, "alienating politically influential constituencies." So beyond the real cuts, the tricks is to find things that appear to be cuts, sufficient to make the budget appear reasonably close to balance, while also paying for the additional spending, mostly through the tax code, that the President will propose. The cuts and the new spending have to add up, but just for one day.

So the second type of "cut" in the budget will be proposals for cuts that will simply never happen and everyone knows it. No one even gets that worked up when the president proposes them. This category usually comprises the largest portion of the cuts in any president's budget. Here the secret is to go after strong clients, clients so strong that everyone knows no one will ever touch them. It's not clear from this first article which of the cuts fall into this category, but they will not be hard to spot in the actual budget. For example, most years presidents propose to cut Impact Aid, an education fund for school districts that have lots of federal employees or federal land exempt from local taxes. It's a wasteful program, but there are tens of thousands of Impact Aid school districts, their lobby is well-organized and relentless, and cutting it just isn't going to happen. But if you're OMB, and you need your numbers to add up today, there's no reason not to put it in. It saves a few hundred million on paper, and your job is done. Proposing to cut a defense project whose prime sponsor chairs the defense appropriations subcommittee is another good way to get some savings on paper. And the affected congressman probably doesn't even mind. It gives him a way to announce that he "saved" the project. The proposed cuts to veterans benefits mentioned in the Times probably fall in this category.

Third, and a variation on the second, is the cut that the administration will itself reverse with great fanfare. Here's how it works: You propose some cut in the budget. It helps your numbers add up, which is to say, it offsets the cost of your tax cut or your spending on such urgent national needs as "encouraging sexual abstinence among teenagers." But weeks after the budget is announced, you grandly announce that you have reconsidered, and will put the matter off for further study. Everyone's happy. And you're not required to go back and find another cut to replace the first one. The Times article mentions one cut on which this process seems to have already begun: it reports that "the Pentagon has been considering a new proposal to increase pharmacy co-payments for [military] retirees," but also that the indignant Military Officers Association believed it had won a concession from the Pentagon to study the issue for another year. Sometimes you don't judge this right, and have to withdraw the proposal even before you use it to make your numbers.

Finally, there is the kind of gimmick that can be used to reduce apparent spending on entitlement programs, which is where the real money is. Here the trick is to propose some sort of inoffensive policy change that might lead to a chain of events that would reduce spending on some federal program. And then get the Congressional Budget Office to "score" the change as producing a budget savings. Whether it actually does or not is a matter for another day. There's a great example of this in the Times story:

Federal officials said they would also require families seeking housing aid to help the government obtain more accurate information on their earnings. As a condition of receiving aid, families would have to consent to the disclosure of income data reported to a national directory of newly hired employees. The directory was created under a 1996 law to help enforce child-support obligations.

(As a congressional staffer, I drafted the bill that created that directory of new hires, so this is familiar territory.) I'm sure this is a perfectly good idea, and it's hard to argue with getting accurate information about people's eligibility for programs. Some analyst at the Congressional Budget Office is going to be handed this proposal and told to score it. "I don't know" is not an option, so he will produce a number for the savings this provision will produce. But what if the income information reported through the directory doesn't really change the criteria of who is eligible? What if other people with low incomes appear to replace those who are disqualified through use of the database? What if it takes longer than expected to add income data into the database, and set up privacy protections? And on and on. The connection between the small and inoffensive act of including income in the database, and actually reducing public housing costs, is rather tenuous. But as long as you can get the number you want from CBO, the reality doesn't matter one bit.

If you can spot these gimmicks, you might be protected from the baloney that will fall from the sky every day from now until the budget is released at the beginning of February.