Press Release
Sunday, September 13, 1998

WASHINGTON--Budget discipline for spending and revenues are both in jeopardy, according to the Concord Coalition, a bipartisan budget watchdog. As Congress and the Administration rush to cut end-of-session budget deals, Concord warns there will be a strong temptation to dip into projected budget surpluses to fund tax cuts and "emergency" appropriations.

"Two wrongs don't make a right," said former Sen. Warren Rudman (R-N.H.), a co-chairman of the Concord Coalition. "It's important for those doing the bargaining to hold firmly to the budget rules. Otherwise, pre-election political horse-trading could result in serious long-term fiscal damage. Instead of on-budget surpluses starting in about five years, we would face permanent red ink. This is far too high a price to pay for short-term political appeal," Rudman added.

Former Sen. Sam Nunn (D-Ga.), a co-chairman of the Concord Coalition, pointed out that "the budget is balanced only on a 'unified' basis. Without Social Security, deficits will continue in the $40 billion range for several years. We don't expect a significant on-budget surplus until 2006, and that depends on a strong economy, budget discipline, and resulting lower interest costs because of reduced levels of debt held by the public."

"The Concord Coalition is concerned about a breakdown of the pay-as-you-go rules and discretionary spending caps that have governed the budget process for nearly a decade," said Martha Phillips, executive director of the Concord Coalition. "Enacting permanent tax cuts that are not offset by revenues or permanent spending cuts would violate PAYGO and permanently increase the on-budget deficit."

Concord also is concerned that spending that ought to be subject to discretionary appropriations caps might be designated instead as "emergencies." The caps enacted in the 1997 balanced budget agreement will reduce discretionary appropriations by nearly 10 percent by 2002, after taking inflation into account. Projections of future budget surpluses depend on sticking to those caps.

Phillips reminded policy makers that the projected surpluses also assume that annual net interest costs will decline steadily from $244 billion this year to $140 billion in 2008. If the unified surpluses are used for tax cuts or spending increases, the debt held by the public will not decline as much, net interest will not drop, and on-budget surpluses will not occur.