Budgetary smoke this week mirrors a larger problem

Congress comes back this week for a quick postelection session that may presage a central challenge of President Bush's second term: how to pay for everything.

Both the president and rival John Kerry made campaign pledges to slash federal deficits, but neither offered what analysts saw as a solid plan to achieve that in an era of tax cuts and entitlement increases. Now, just two weeks after the election, the budget squeeze will be on display.

In the next five days, lawmakers will try to wrap up nine spending bills for 2005 that have been the object of intense negotiations. And, with the nation having borrowed to its limit, they'll move to raise the national debt limit above $8 trillion.

These moves, coupled with efforts to pass a historic overhaul of the US intelligence community, will offer an early glimpse of the new power balance in Washington after an election that leaves Republicans stronger in both chambers of Congress and Mr. Bush with a clear-cut electoral win. Democrats say the new balance on Capitol Hill puts responsibility for government deficits even more squarely on the White House.

"Thirty-two years ago, the national debt limit was smaller than the [annual] deficit is today," says Tom Schatz, president of Citizens Against Government Waste, who says he expects more pressure from fiscal conservatives on the Hill for spending cuts in a second term.

This week, Republicans are expected to propose raising the federal debt limit by $690 billion. It will be the third time the Bush administration has had to request a higher debt limit since 2002.

While in the minority, Republicans used rising deficits - and the consequent need to raise the debt limit - as a club to take back control of the House. This time, GOP leaders are expected to move the measure as discreetly as possible, perhaps tucked into an end-of-session spending bill.

In anticipation, Democrats are crying foul. "The secretary of the Treasury has told us that the US government will default by Nov. 18, unless Congress raises the debt limit," said Rep. John Spratt (D) of South Carolina. "An issue of this importance should have a full debate and a freestanding bill."

In the end, lawmakers will vote to raise the debt ceiling, currently $7.384 trillion, because failure to do so would prompt the first-ever US default on Treasury obligations. But it highlights the challenge Bush will have delivering on his promise to cut the deficit in half in the next five years.

The specter of mushrooming federal debt could also open a rift in GOP ranks between the White House and conservatives who say they have been holding their fire on deficits until after Nov. 2 elections. "We didn't want to risk having a President Kerry appoint judges," said Rep. Mike Pence (R) of Indiana, in an interview before the vote. New GOP senators-elect, such as Jim DeMint of South Carolina and Tom Coburn of Oklahoma, will beef up the ranks of the fiscal budget hawks.

Another test of whether the president can make the numbers add up in a second term comes in the spending bills for fiscal year 2005, which began Oct. 1. "I thought I was pretty clear about the need for those bills to be fiscally responsible, and I meant it," Bush said at a Nov. 4 news conference. Bush is asking Congress to hold discretionary spending to $821.9 billion, not including the war in Iraq and Afghanistan. At press time, lawmakers were less than $8 billion from that target, but some of the apparent cuts were achieved by budgetary smoke and mirrors, such as designating spending as "emergency" or shifting some items into 2006.

"The two big legacy issues for President Bush are making his tax cuts permanent and creating private accounts in Social Security. Both are dependent on restraining spending," says Chris Edwards, a policy expert at the libertarian Cato Institute.

Control of defense spending - with Iraq and Afghanistan now consuming large (off-budget) sums - will be one key factor determining whether overall deficits can be reduced from forecasts near $400 billion by 2009.

Congress this week will renew its focus, meanwhile, on another area where defense spending is in play: tough negotiations over the future of intelligence reforms urged by the 9/11 commission.

"If we don't get it in the lame duck [November] session, it could put it off for a long time," says Thomas Kean, chairman of the 9/11 commission. "Because they'll have to form a new Congress, reintroduce a new bill, pass it in both houses. It could take six months. In the meantime, the American public is less safe."

The bill is stalled mainly over who will control the now classified intelligence budget, estimated in the range of $40 billion. So far, it's been a turf battle royal: The Senate version, backed by the 9/11 commission, gives full budget authority to a new national intelligence director (NID), while the House version lets the Pentagon keep control of its large portion of intelligence funds.

"The prime budget authority has got to stay with the NID, or the NID won't be effective. If somebody doesn't have the power of the budget in government, that's not somebody anybody listens to," said Governor Kean in an interview on Friday.

"The president is behind it [the Senate bill]," says John Feehery, spokesman for House Speaker Dennis Hastert. "But some elements in the White House are not."