Monday, November 22, 1999

Huge budget surplus
may be an illusion

Bullet The issue: Two years ago Congress enacted ceilings on discretionary spending starting in 1999, but the latest budget ignores those ceilings.
Bullet Our view: The $1-trillion budget surplus projected over 10 years depends on adherence to those spending limits and probably will not be achieved.

A couple of months ago a warning appeared that the projected $1 trillion surplus over the next decade that the politicians have been touting could be a mirage. Jonathan Chait, a fellow at the New America Foundation, wrote in The New Republic that the supposed surplus is based on a cynical deal made by the Clinton White House and congressional Republicans in the so-called Balanced Budget Act of 1997.

The deal was that Congress would steadily reduce discretionary spending starting in 1999. This is the year the spending cuts were scheduled to begin. Chait predicted that it wouldn't happen, that Congress was incapable of enacting those cuts that were essential to producing the huge surplus.

He was right. Robert Reischauer, former director of the Congressional Budget Office, described the new budget as "one more nail in the coffin of the $1 trillion surplus." He said, "The budget is on a path of absorbing most, if not all, of the non-Social Security surplus."

Leo Rennert of McClatchy Newspapers wrote that the spending ceilings of the 1997 act were discarded in this year's negotiations. Most analysts and many lawmakers regarded the caps as politically unrealistic, Rennert said, "and the new budget seems to confirm their assessment."

Reischauer estimated that the new budget is $20 billion over the spending limits and may require that much borrowing from Social Security.

Robert Bixby, executive director of the Concord Coalition, a private budget watchdog group, said, "If the government keeps spending at the level provided for the new budget year, the trillion-dollar surplus is gone."

In order to disguise the budget overruns, Congress has used a number of gimmicks. Billions of dollars for government operations have been designated "emergencies" to evade the spending caps. House Speaker Dennis Hastert even designated the 2000 census as an emergency.

The likelihood that the huge surplus won't materialize has been ignored thus far by the presidential candidates. George W. Bush is counting on the windfall to finance a big tax cut and an increase in defense spending. Al Gore and Bill Bradley want to use the surplus to expand health insurance coverage and other expensive programs.

The public ought to take all that talk with a grain of salt. At the rate Congress and the White House are going, finding ways to dispose of that surplus won't be necessary because it won't exist.

Regardless of party affiliation, most politicians love to spend taxpayers' money. The fact that two years ago the members of Congress committed future Congresses to limit their spending counts for little compared with the temptation to reward their constituents.


Labor opposes China

Bullet The issue: The president of the AFL-CIO plans to fight the Clinton administration's new trade agreement with China and Beijing's admission to the World Trade Organization.
Bullet Our view: Organized labor fails to recognize the fallacy of protectionism.

MARK down organized labor as an opponent of China's admission into the World Trade Organization. AFL-CIO Presisdent John Sweeney has vowed an all-out fight on that issue.

In a talk at the National Press Club in Washington, Sweeney promised to field "tens of thousands of protesters" on the day the WTO kicks off a three-year round of negotiations at a ministerial meeting Nov. 30 to Dec. 3 in Seattle.

"It is disgustingly hypocritical for the White House to posture for workers' rights in the global economy," he said, "at the same time it prostrates itself for a deal with a China that treats human rights as a disposable nuisance."

The United States concluded 13 years of bilateral negotiations last week with an agreement that opens Chinese markets wider to American producers and paves the way for China to join the WTO. China still has to conclude similar bilateral agreements with the European Union and other countries before it can enter the trade organization.

Congress will also have to grant China normal trade relations on a permanent basis to make the trade agreement effective. That is likely to be a contentious question, especially during an election year and with organized labor opposed. The AFL-CIO has been a vocal opponent of previous trade pacts, including the North American Free Trade Agreement.

Sweeney vowed to make the trade agreement with China a major issue for the 2000 elections. The labor federation recently endorsed Al Gore, and intends to use that as leverage against the trade pact.

Sweeney noted that Gore and his Democratic rival, Bill Bradley, have made strong commitments to labor standards, human rights and environmental protection in trade agreements, "and we intend to hold them to their commitment."

However, Gore will be remembered for demolishing Ross Perot in their televised debate over NAFTA, with the vice president defending the agreement.

Organized labor certainly has a point when it protests China's labor policies and violations of human rights. Beijing's record is abysmal.

The question is what to do about it. Isolating China by keeping it out of the World Trade Organization isn't likely to make conditions any better for Chinese workers. Once China is admitted to the WTO it can be held accountable for its abuses.

Sweeney denied that the AFL-CIO is taking a protectionist position, but in opposing the trade agreement its obvious motive is protection of American jobs. The flaw in its thinking is its failure to acknowledge that the creation of jobs for workers in foreign countries can make them customers for American products.

Published by Liberty Newspapers Limited Partnership

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John M. Flanagan, Editor & Publisher

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Diane Yukihiro Chang, Senior Editor & Editorial Page Editor

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