From the WSJ Opinion Archives
THE BUDGET
No Deficit of Courage
Congress and the president are getting spending under control.
With Congress's completion of its work on the 2005 budget this week, President Bush and congressional leaders achieved a significant victory in the battle for spending discipline in Washington.
When the president released his Fiscal 2005 Budget in February calling for a disciplined budget, some politicians and pundits dismissed it as "dead on arrival." They warned that its spending limits could not be met or would require devastating reductions in key priorities. They were wrong.
To the credit of key leaders, Congress stayed within budget limits and met key priorities. While the appropriations bills are not perfect, they honor the goals President Bush set last February: Overall discretionary spending in Fiscal 2005 will rise only 4%, the same as the average increase in American family income. The budget also provides substantial increases in funding for essential defense and homeland security needs.
Just as the president proposed, discretionary spending for nonsecurity programs will rise only about 1%, which is half the rate of inflation and the lowest rate of growth since the Republicans first took control of Congress in the mid-1990s.
This is the fourth consecutive year that growth in such spending has declined, down from 15% growth in the last budget year of the previous Administration. And even within this year's restrained budget, the Congress managed to fund important priorities, such as expansions in community health center services, the president's Community Colleges initiative, and an ambitious plan to fight the global AIDS crisis.
One of the best ways to continue meeting our priorities while maintaining spending discipline is to focus on what federal programs achieve, not just what they spend. President Bush is focused on eliminating wasteful spending in our $2.4 trillion budget. He is reforming poor-performing programs, and eliminating projects that do not stand the test of rigorous review and analysis. The president's Management Agenda is promoting greater emphasis on results, so that taxpayers know that the tax dollars they send to Washington are spent wisely.
Does the success in passing disciplined spending bills this year mean that we can stop worrying about deficits? Definitely not. The deficit remains too large. But a stronger economy has created greater-than-expected tax revenues that have helped bring down the 2004 federal budget deficit from an earlier estimate of $521 billion, or 4.5% of gross domestic product, to $413 billion, or 3.6%. And if we can extend the budget progress made this week while sustaining pro-growth economic policies, we will remain ahead of pace to accomplish the president's goal of cutting the Federal budget deficit in half within five years. That would bring the deficit well below its 40-year historical average of 2.3% of GDP. Importantly, the Congress is showing that it can achieve this goal without resorting to tax increases, which would harm our economy.
As we make progress toward reducing the deficit in the short term, we must also address the long-term fiscal danger posed by our entitlement programs. Social Security alone faces a $10 trillion unfunded obligation. As currently structured, the program will be unable to provide promised retirement benefits to young Americans entering the workforce today. We know that the system needs to be fixed. The president has called for reforms that would keep Social Security's promises to today's retirees and near-retirees, while giving younger workers a chance to save in personal accounts for their own retirement. While we prepare for the retirement of the baby-boomers, such reforms will be essential to ensuring the country's long-term fiscal health.
Meeting both our short- and long-term fiscal challenges will require even more determination than we saw in this year's appropriations process. It takes political courage to face down the inevitable critics who both call for deficit reduction while fighting spending cuts in individual programs. Yet it is exactly that courage that will be required if we are to provide the fiscal foundation for a strong economy in the years ahead.
Mr. Bolten is director of the Office of Management and Budget.
