By James K. Glassman
Tuesday, May 20 1997; Page A19

Let's not kid ourselves. The budget that Congress is set to pass this week may succeed in showing a zero deficit on paper in the year 2002, but it fails miserably in its most important function – holding down federal spending.

In the latest Washington orgy of self-congratulation, Rep. John Kasich (R-Ohio), the House Budget chairman, proclaimed, "Cooperation between Congress and the president is resulting in smaller government."

No, it's not. The way to get smaller government is by spending less money. In fact, federal spending will rise sharply in fiscal year 1998 – that's the year that starts on Oct. 1, 1997, and the only budget year that has any real significance. All the other numbers for all the other years are sheer fantasy. As anyone who runs a business knows, the only figure you can possibly control is next year's spending.

Also, when the government spends (whether it gets its funds through borrowing or taxing), it is extracting money from the private sector, money that could be used for capital investment, for creating new businesses and better jobs.

To paraphrase James Carville: It's the spending, stupid – not the deficit.

And how much will federal spending increase next year? That's a question that I have been asking the House Budget Committee since May 2, when the original deal was announced. Finally, I've managed to get the answer (from other high-level GOP sources). For fiscal 1998, spending will be $1.692 trillion. For this year, spending is estimated at $1.622 trillion, so the government be spending $70 billion more – an increase of 4.32 percent.

How big is that increase?

It's the largest since Bill Clinton became president, larger even than in the years when the Democrats controlled Congress.

It's $5 billion more than Clinton asked for in the budget he submitted in February. (By the way, the new budget also calls for spending of $1.889 trillion in 2002; Clinton sought only $1.880 trillion.)

It's well ahead of inflation, which is estimated for 1998 at between 2.7 percent and 2.9 percent. This increase is about 1.5 percentage points (or half again) higher.

These are the hard facts. What you hear from politicians simply tries to obscure them. For instance, Kasich bragged last week, "Over the next 10 years, passage of this plan will save taxpayers over $950 billion."

What he means is that the government is now planning to spend about $1 trillion less in the next decade (out of a total of about $20 trillion) than it was planning to spend the last time it made plans. That earlier plan is called the "baseline," and it's a device that both Congress and the president use to make it seem that they're accomplishing more than they really are.

Many conservatives – including Kasich – used to criticize the use of the baseline as a deception. Indeed, they once proposed legislation to outlaw its use. Now they use it themselves, with trumpets.

The reason that the federal deficit is projected at zero under the new budget is not that government will be smaller, but that revenues from the taxpayers will be larger – much larger. According to the president's February budget, the Treasury was expected to collect $1.5 trillion from citizens and businesses in 1997. According to the new bipartisan budget, that figure will rise to $1.9 trillion in 2002. Meanwhile, spending will rise from $1.6 trillion to $1.9 trillion. And there you have it: a balanced budget.

But here's another idea. Why don't we simply increase spending from $1.5 trillion to $1.8 trillion, and taxes from $1.6 trillion to $1.8 trillion? Again, the deficit would be zero, but the economy – and individual Americans – would be big winners.

Instead, Congress is choosing a more familiar route – spend more and tax a lot more, and hope the two come out even.

This is the same route we have been traveling for the past four years, despite all the jabbering about "smaller government." In a January report, the Congressional Budget Office looked at the dramatic decline in the deficit – from $290 billion in 1992 to $107 billion in 1996 – and asked, "How did this happen?"

The answer wasn't reduced spending. In fact, spending rose 13 percent, roughly the rate of inflation. Instead, the deficit fell because of higher revenues – a phenomenal increase of 33 percent.

Yes, the budget does call for tax cuts, but they are minuscule – and, again, the word "cut" is wildly misleading. All it means is that the Treasury will collect $85 billion less over five years than it expected to collect with the original baseline. That's $85 billion out of total tax collections of more than $9 trillion, or less than one percent.

But far worse is that the new budget calls for an acceleration in spending – well beyond inflation. It includes $32 billion in new initiatives demanded by Clinton, including health coverage for children in low-income (but not "poor," since they're already covered by Medicaid) families, restoration of welfare benefits for legal immigrants and more Medicare subsidies for seniors.

Republicans have agreed to protect increased spending for Head Start, the Job Corps, child literacy, etc., etc. As for actually reducing government programs, don't hold your breath. There is no mention in the budget of killing Amtrak or the National Endowment for the Arts or the Advanced Technology Program, which provides $225 million annually to huge corporations such as IBM to conduct research that they would undoubtedly fund on their own.

But to cut spending is hard. To collect more taxes that are the fruit of the sacrifices and genius of individual American managers and workers – that's easy. It's disappointing, but hardly a surprise, that this Congress has chosen the easy way.