Remember back in 2001, when the federal government appeared to be swimming in record surpluses and those killjoy moderates were cautioning tax-cut-happy conservatives to scale back that proposed $1.6 trillion tax cut in case something unexpected happened — like say, an economic downturn or a catastrophic terrorist attack or even a war?
Those were heady times.
Three years have passed since then, and though no one could have predicted the confluence of events that attacked the nation and the economy, it still appears Congressional moderates have an opening this budget season for a few “I told you so” moments. And they’re already taking them.
“I’m sort of frustrated that we’re in this position,” Sen. Olympia Snowe (R-Maine) said last week of how her sober counsel was ignored back in 2001. “Unfortunately, Congress likes to spend the whole thing and worry about it tomorrow.”
Now that tomorrow has come, moderates in both parties are in the familiar — but perhaps, this year, stronger — position to affect the way that Congress addresses a relatively austere fiscal 2005 budget proposal and the projected $521 billion deficit facing them this year.
Remember that last year it took only two moderates — Snowe and Sen. George Voinovich (R-Ohio) — to cut President Bush’s $726 billion tax cut in half. Think of what a whole group of them could do.
But don’t get too excited yet. The Senate Centrist Coalition met for the first time this year just last week, and in previous years, it’s been difficult to get them to vote as a bloc. Meanwhile, House moderates have notoriously backed down on their budget benchmarks in the face of the powerful House GOP leadership.
Still, they say they do plan to do something. They just don’t know what it is yet.
“Centrists have the potential to make a big impact,” predicted retiring Sen. John Breaux (D-La.), chairman of the Senate Centrist Coalition, whose meeting last Thursday included a talk from a fellow deficit alarmist, General Accounting Office chief David Walker.
Breaux noted his group, which Snowe co-chairs, will likely meet often with Walker as they begin to formulate their collective strategy for dealing with the budget resolution this year.
Snowe agreed that moderates would have to come up with a plan but said it’s unclear where the consensus is right now.
As for herself, she is considering falling back on an old standby: the trigger.
For those unfamiliar, the notion of a trigger that would halt tax cuts in their tracks if deficits loomed too large was floated by moderates in 2001 as a way to prevent the exact situation the government now finds itself in. Whether it would have worked the way they envisioned is still a matter of debate.
At the time, opponents warned it could backfire because businesses and individuals would not be able to make solid financial plans if they were unsure whether a particular tax cut would be available to them year in and year out.
Still, Snowe said it’s time to revive the proposal, only this time rather than trying to protect surpluses, it would act to prevent the deficit from getting ever larger.
Back in 2001, Federal Reserve Chairman Alan Greenspan advocated triggers. If you believe former Treasury Secretary Paul O’Neill, Greenspan even conspired with him to force triggers on the White House. It apparently didn’t work they way they hoped.
With O’Neill’s scathing views on the administration in the news lately, don’t be surprised if Greenspan is asked about triggers again when he testifies Wednesday before the House Financial Services Committee or on Thursday before the Senate Banking, Housing and Urban Affairs panel.
If he reaffirms his support for triggers again this week, “that will be enough to kick-start the discussion,” said one Senate GOP leadership aide.
Indeed, Greenspan’s words don’t just make the stock market rise or fall. He also moves lawmakers.
“I got my idea for a trigger from Greenspan,” Snowe noted.
Although Snowe said she has not mapped out the details of her newest trigger proposal, Senate Republican leaders are fully aware of the potential problems it could cause them if they seek to make the Bush tax cuts of 2001 and 2003 permanent — as the president has asked them to do.
While they believe there is significant bipartisan support for a handful of tax extenders — such as the child tax credit, elimination of the marriage penalty and the higher threshold for the 10 percent income tax bracket — they know that any other proposals will likely require them to have more than just a few tricks up their sleeves.
“Anything more than those three provisions will require a mechanism to make sure the extension of [other] provisions don’t add to the deficit,” noted the Senate GOP leadership aide.
Breaux agreed that the tax extensions would likely make it but that any other tax cuts would probably be a nonstarter with moderates.
“There’s a legitimate concern in our group — can we afford it?” he said.
But because triggers never really caught on among conservatives and even some deficit hawks, Senate leaders may try to cut moderates off at the pass with other budget enforcement notions that won’t necessarily affect tax cuts.
They’ve already begun brainstorming other ideas, including reinstituting pay-as-you-go rules that require offsets for additional spending on mandatory programs like Medicare and Social Security.
Senate Republicans are also considering reviving statutory spending caps, such as those that were in effect during the 1990s.
Perhaps as a way of looking responsible without having to bow to new budget enforcement rules, appropriators have already told GOP leaders that they’re willing to abide by Bush’s proposed $818 billion discretionary spending cap this year — with one caveat.
Appropriators don’t want to be told how to spend it. In other words, they’ve told budget resolution writers to refrain from sticking in specific numbers for defense and homeland security so that the Appropriations panels have wider play with the whole pot, according to the Senate GOP leadership aide.
But appropriators probably have a few months to figure out how to deal with all the proposals for new statutory budget enforcement mechanisms. Look for a confrontation this summer when Congress debates raising the federal debt limit yet again and all those budget-minded Members start trying to add their latest, greatest idea.