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U.S. spending obligations surge

Recent bills – for students, GIs, housing market – add to long-term budget commitments.

By / August 5, 2008

Andy Nelson


Washington - The Democratic-controlled Congress and the Bush administration have presided over a surge in new federal spending obligations that may be the most enduring legacy of the 110th Congress.

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From new entitlements such as a GI bill for military veterans to recent federal commitments to shore up a troubled housing market, Washington is taking on obligations with long-term consequences for taxpayers. At the same time, critics say, lawmakers aren't exercising the oversight needed to keep these commitments manageable.

"In the last three or four months, the momentum has really built up for more spending," says Michael Franc, vice president of government relations for the Heritage Foundation, a conservative think tank in Washington. "Congress has moved a whole range of bills that take the problem up another notch."

Here are some of the items.

•A new housing law, signed last week, commits the government to backing some $300 billion in troubled mortgages.

•A higher education bill adds $169 billion over the next five years.

•The GI bill that extends education benefits to veterans or their family members will cost $62 billion over 10 years.

•Congress boosted the statutory debt ceiling by $800 billion to $10.6 trillion. That's $4.8 trillion more than it was at the end of 2001.

Moreover, last week the White House Office of Management and Budget (OMB) projected the US budget deficit for the next fiscal year to be $482 billion, the largest deficit in US history in nominal terms.

Relative to the size of the US economy, the deficit would make up 3.3 percent of the gross domestic product. OMB director Jim Nussle noted during the July 28 mid-session review that, in those terms, the projection is "well below the record deficit of all time, which was 6 percent of GDP back in 1983."

"The important point to remember is that near-term deficits are both temporary and manageable if, and only if, we keep spending in check, the tax burden low, and the economy growing," Mr. Nussle said. "Excessive spending beyond the president's budget plan will make the problem worse."

Congress has yet to approve even one of the must-pass annual spending bills for the fiscal year that begins Oct. 1.

Democratic lawmakers blame the soaring deficit on the Bush tax cuts, especially for people with the highest incomes.

"Mr. Bush came to office with the biggest surpluses in history and he will leave office with the biggest deficits in history. That's the bottom line," said Rep. John Spratt Jr. (D) of South Carolina, chair of the House Budget Committee, on July 28.