War, Budget, and Surplus

The war with Yugoslavia is complicating Washington's annual budget debate.

President Clinton's budget, with modest targeted tax cuts and some increased spending on new programs, is going nowhere on Capitol Hill. Problem is, neither is the Republicans' alternative, which attempts to wall off Social Security surpluses and calls for large tax cuts over the next 10 years.

Meanwhile, the immediate unknown - just how much the war over Kosovo will cost - grew a bit more obscure with House votes Wednesday to block use of ground troops without authorization and to withhold an endorsement of the current air campaign.

The budgetary task facing Congress's GOP leadership looks nearly impossible. First, they want to protect all Social Security funds. Second, they want to cut taxes $778 billion. Third, they want to increase defense spending to restore readiness. Fourth - and here's the catch - they also want to maintain the budget caps enacted in the 1997 balanced-budget agreement.

Democrats and many Republicans say it can't be done. The caps were too tight even before the bombing began.

Republicans are likely to get some of their increased defense spending by adding it to President Clinton's $6 billion emergency spending request for Kosovo. "Emergencies" aren't subject to the budget caps. The money will come out of the surplus. But, now and in fiscal 2000, that surplus is made up entirely of Social Security funds. Non-Social Security surpluses don't start until 2001.

Anything else that breaks the budget caps in fiscal 2000 spending bills, including additional defense hikes, would also come entirely out of Social Security. That includes GOP tax cuts or the president's new spending. The government may well bust the budget caps by some $30 billion in the 2000 spending bills. At that rate, say goodbye to the non-Social Security surplus.

What to do? Well, there is one very practical, if politically challenging, way to preserve the caps, save much of the surplus (to help reform Social Security and Medicare), bolster defense readiness, do a modest tax cut, and even increase spending in limited areas. It's to reduce the overall size of the federal government. Some suggestions:

*Eliminate "corporate welfare" subsidies to American companies.

*Dissolve the Commerce Department, spinning off agencies such as the Census Bureau and the National Oceanic and Atmospheric Administration.

*Consolidate education programs and trim the federal education bureaucracy by providing more aid directly to states and local schools.

*Review US military strategy and attack continued Pentagon waste: surplus bases, inefficient procurement, and weapons systems forced on the military by Congress.

Some of this is anathema to one party or the other. But something akin to it will have to happen to maintain fiscal discipline. Otherwise, that giant sucking sound you hear may be the surpluses, with all the good they do the economy, going down the drain.

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