Newspaper article The Christian Science Monitor

The Budget Package Put into Perspective

Newspaper article The Christian Science Monitor

The Budget Package Put into Perspective

Article excerpt

PREDICTING what "a couple of dozen" members of Congress and Clinton administration officials will decide in detail in the bargaining sessions on the budget that began this week is harder than forecasting the economy, says economist Christopher Probyn. It's tough.

One outcome seems certain: The growth of federal spending will slow. That restraint, aimed at balancing the budget by 2002, should boost both the overall economy and the housing market, figure Mr. Probyn and his colleagues at DRI/McGraw-Hill, an economic consulting firm in Lexington, Mass.

Contrary to skeptics, the Budget Enforcement Act of 1990 also worked to hold back federal spending. "Congress promised to rein in the growth of government spending, and it did," notes Paul Kasriel, an economist at the Northern Trust Company, Chicago. Federal outlays grew at a compound annual rate of 9.3 percent between 1965 and 1990. From 1990 to 1995, the timespan this act was in force, the growth slowed to 5.2 percent annually. These numbers measure a relevant subset of federal outlays that excludes interest payments on the national debt and deposit-insurance-related expenditures (remember the thrift and bank crisis?).

And, Mr. Kasriel says, if the budget resolution of June 1995 is enacted and adhered to, the compound annual growth in these expenditures will decelerate further to a shade above 3 percent.

Whether the compromise due by Dec. 15 will quite reach that goal is uncertain. But reports from Washington say the Clinton administration has already proposed to accept more than half the Republican cuts from domestic appropriations for this fiscal year. A compromise may mean somewhat more spending and somewhat smaller tax cuts.

Whatever happens, there will not be a huge shrinkage in the size of the federal government. "It is still going to be a very big government," says Herbert Stein, who was Richard Nixon's top economist and is now at the American Enterprise Institute, a conservative think tank in Washington.

In the last two decades, federal outlays have run between a low of 20.7 percent of the gross domestic product (1979) and 24.4 percent (1983, after a recession). …

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