By Peter Baker
Washington Post Staff Writer
Tuesday, October 16, 2007
ROGERS, Ark., Oct. 15 -- The White House and Congress are heading for what President Bush predicts will be a "fiscal showdown" at a time when the nation's financial health has actually improved for the moment.
After years of record-high deficits, both parties are now projecting that the budget can be balanced by 2012. But as each side seeks to outmaneuver the other politically heading into next year's elections, the rhetorical battle between Bush and lawmakers over spending has never been more heated.
Bush used an appearance here Monday to chastise Democratic leaders for failing to send him even one of the 12 annual spending bills more than two weeks into the new fiscal year, and he eagerly vowed to veto what he deems excessive spending. Democrats fired back by highlighting the one veto Bush has exercised: the rejection of a dramatic expansion of a popular children's health insurance program.
The backdrop for this confrontation belies its intensity. Just last week, the Office of Management and Budget reported that the deficit in the 2007 fiscal year, which ended Sept. 30, fell to $163 billion, barely half of what it was two years ago and the lowest in five years. While still a hefty chunk of money, the deficit now represents just 1.2 percent of the overall economy, lower than the average rate over the past four decades.
Yet Bush has gotten no credit for that with the public, prompting the White House to look for opportunities to fight Congress over spending and reinforce his credentials with a disaffected Republican base. The latest Washington Post-ABC News poll found that just 27 percent of Americans approve of Bush's handling of the deficit, matching his all-time low on the issue, compared with 64 percent who disapprove.
Little wonder, then, that the White House staff made sure to hang two giant banners that said "Fiscal Responsibility" behind the president for his talk with local business leaders here. "We're beginning to get control of that deficit," Bush said. "And the reason why is that a growing economy yields additional tax revenues. And then when you work with Congress to set priorities . . . you can reduce your deficit without raising taxes."
As the federal government operates on a stopgap spending appropriation, Bush accused Democrats of wanting to add an extra $200 billion in spending over the next five years and dared them to send him spending bills he could reject. "You're fixing to see what they call a fiscal showdown in Washington," he said. "The Congress gets to propose, and if it doesn't meet needs as far as I'm concerned, I get to veto. And that's precisely what I intend to do."
Stanley Collender, managing director of Qorvis Communications and a federal budget specialist, said the debate is disconnected from the improving deficit numbers. "It's purely a power play by the White House," he said. "If these spending bills were coming from a Republican-controlled Congress, the president would be signing them and applauding the House and Senate for their fiscal responsibility."
Democrats are just as eager to fight over spending proposals, particularly the State Children's Health Insurance Program. Bush, who did not veto a single appropriations bill while Republicans controlled Congress, rejected a bipartisan proposal to more than double spending on SCHIP over the next five years. Polls show Bush on the wrong side of public opinion, and many congressional Republicans have opposed him on the issue, although not enough to override the veto.
"What happened to compassionate conservatism?" Democratic National Committee Chairman Howard Dean asked in a statement Monday. "President Bush and his Republican friends are willing to spend billions of dollars on their failed Iraq strategy, but they have no problem denying our children the health care they need and deserve. That's just plain wrong."
White House aides recognize that the SCHIP fight is, in many ways, a political loser, but they hope to portray it as part of a broader struggle over spending and taxes.
Bush inherited a budget surplus when he took office, but it soon disappeared amid a recession, the 2001 terrorist attacks and his massive tax-cutting program. By 2004, the deficit had soared to $413 billion, the highest dollar figure in history. But it fell to $248 billion last year and, according to last week's report, to $163 billion this year.
Senate Budget Committee Chairman Kent Conrad (D-N.D.) argues that the shrinking of the deficit is not terribly significant because Bush has increased the overall debt so much and because the true size of the deficit is masked by revenue borrowed from Social Security. The national debt has shot up to $5 trillion, or $9 trillion if the diverted Social Security funds are counted.
"There is no fundamental change in the trajectory at all," Conrad said Monday. "You've got a short-term, very minor improvement in the deficit number, and the debt number has not improved appreciably."
While Bush complains about $20 billion in Democratic spending proposed for the coming year on education, children's health and veterans' health, Conrad notes that the president proposed an additional $190 billion for the wars in Iraq and Afghanistan. "He's like the magician who tries to distract people with one hand while he does something with another," Conrad said.