What Bush Learned From Enron
How to hide an $87 billion debt by pretending it's off the books.
slate.msn.com
By Daniel Gross
Posted Monday, September 15, 2003, at 2:52 PM PT
I guess President Bush was paying attention during all those corporate
scandals. After all, his latest budget strategy is pure Enron: If you leave $87
billion in spending out of the budget, the rest of your balance sheet will look
a lot better-at least until the bill comes due. Investors learned this the hard
way from Enron, which hid billions of dollars in liabilities on
off-balance-sheet partnerships. The president has also been inspired by
those companies that take "nonrecurring" charges against earnings for
unforeseen, unplanned events-an acquisition, a plant closing, excess
inventory-over and over again. Between 1999 and 2001, woebegone
Motorola took such charges in eight straight quarters. While presidents
have done this on a small scale for years, President Bush is using
supplemental spending to fund his most cherished initiatives.
The importance of dealing straightforwardly with stakeholders has not yet
caught on in Washington, as the president demonstrated with his request for
an additional $87 billion to fund operations in Iraq and Afghanistan.
With the administration's encouragement, Congress will consider the
request as a "supplemental" spending bill-in other words, as funds to be
spent on top of whatever it approves for fiscal 2004. At a time when
deficits have suddenly re-emerged as a campaign issue, this distinction is
important because it enables the president and Congress to continue their
charade of fiscal discipline. As Chris Edwards, director of fiscal policy at
the Cato Institute, notes, it has become a kind of game. Every year the
administration announces it will hold discretionary spending to a 4 percent
increase, and every year the Bushies and Congress gleefully ignore their
vow.
According to data from the Congressional Budget Office, which can be
found here and here, discretionary spending-the portion of the budget
spent on everything except Social Security, Medicare, and Medicaid-rose
13 percent in 2002, 12.5 percent in 2003, and is slated to rise 7.6 percent
in 2004. The increases can't simply be blamed on the war on terror. The
same reports show that discretionary, nondefense spending rose 12.3
percent in 2002 and another 8.5 percent in 2003. In its August budget
outlook, CBO suggested nondiscretionary spending would rise another 7
percent in 2004.
Spending is rising so rapidly largely thanks to the chicanery of supplemental
budget requests, through which the president has proposed spending more
than $150 billion on the war alone. Budget resolutions cap discretionary
spending for a given year. So when needs arise midyear, Congress passes
emergency or supplemental appropriations. But like Motorola's perennial
charges, supplemental requests-which are theoretically one-time
events-have emerged as a way for presidents (not just this one) and
Congress to bust the budget while sticking to the projections they present to
the public. In the 1990s, according to this CBO study, there were 19
supplemental appropriation laws-or about two per year. The annual totals
ranged from $48.6 billion in 1991 to $4.5 billion in 1996, and the measures
funded everything from the first Gulf War to relief from hurricanes,
earthquakes, the Los Angeles riot, and the Oklahoma City bombing in
1995.
Of course, it's difficult to calculate how much it will cost to respond to a
sudden emergency or to a contingent event like a war. But not all
"emergency" spending deals with unforeseen emergencies. Throughout the
spring, as debate on the latest tax cut package heated up, the administration
continued to act as if efforts in Iraq wouldn't require any more funds beyond
what had already been requested for fiscal 2004. Would Congress have
approved the tax cut if it actually had to pass an honest budget-one that
raised discretionary spending by more than 10 percent just to pay for the
war?
By failing to include war spending as part of regular budget requests, says
Robert Bixby, executive director of the Concord Coalition, "It makes it
sound as if it fits within some sort of overall budget plan." Of course, it
doesn't.
Congress will surely approve the $87 billion request-without offsetting the
expenses with cuts in other programs. In doing so, it will increase the
mammoth national debt by $87 billion, or more than 1.3 percent, and
increase nondiscretionary spending by at least 10 percent above 2003
levels. And that's before taking into account the other substantial increases
that are already planned. Just because the spending is supplemental doesn't
mean we don't have to pay it back.
The process of exceeding spending caps with supplemental measures is a
little like an overweight person going to a dietitian and dutifully agreeing to
adhere to a strict daily intake of 1,800 calories in three meals-and then
eating a supplemental cheese steak to feed the emergency hunger pangs that
set in every afternoon. And then charging the food to his kid's credit card.
Daniel Gross (www.danielgross.net) writes Slate's "Moneybox"
column. You can e-mail him at moneybox@slate.com. |
