This Was Not Your Father’s Budget Summit

Posted February 23, 2009 at 4:31pm

The budget summit held at the White House on Monday was actually rather historic.

[IMGCAP(1)]To understand why, think back to any other budget summit you can remember (or, if you can’t remember, that you can Google). Each of those summits occurred when a deal was needed to complete that year’s budget debate. Some procedural or self-imposed deadline was looming, and there was not another way to come to an agreement. The summit almost always occurred late in the process, long after the president’s budget had been sent to Congress and usually after the House and Senate had passed whatever budget they could.

Most of the previous summits were needed because a stalemate existed between the White House and Congress, the House and Senate, Republicans and Democrats, or some combination of all of the above. The only way to get beyond the stalemate was to gather everyone in one place and in effect lock the door so that no one could get out until a deal was reached.

None of these things existed Monday, and that’s what made the summit so different from all those that have been held before.

Monday’s meeting at the White House was held at the beginning rather than at the end of this year’s budget process. In fact, it was held several days before the president’s budget will be sent to Congress, so in some sense it happened before this year’s budget debate even began. That means, of course, that the summit wasn’t needed to overcome a stalemate — a major break from the past. Although there are obvious differences of opinion about what needs to be done on the budget and how, as of yet there is no impasse similar to the ones that in the past created the need for a summit.

In fact, there even seems to be some agreement at this early stage. Few people are talking seriously about reducing the deficit this year. To the contrary, increasing rather than decreasing the deficit is generally accepted as the correct fiscal policy in the current economic environment.

Therefore, holding a summit to talk about deficit reduction when deficit reduction isn’t immediately needed is a budget anomaly: The White House meeting took place to begin to develop the consensus that will be needed when reducing the deficit comes back into vogue.

And there’s no doubt that reducing the deficit will become both economically and politically (pick one of the following depending on your generation) hip, cool, in, da bomb or awesome, at some point in the not too distant future. As soon as there is unambiguous evidence the economy is turning around, the budget policy imperative will switch from stimulus and deficit increases to restraint and deficit decreases.

This means that the budget summit is notable because it was held to talk about a decision that doesn’t actually have to be made for a year or two. That by itself is remarkable in Washington where “long term” often only means until lunchtime tomorrow.

In addition, as the budget history of the past 50 years or so amply demonstrates, building a consensus about how to reduce the deficit usually takes far more time than is available in any one year. Waiting for the budget process to start before addressing the problem almost guarantees that whatever deficit reduction decisions are made will be determined mostly by the need to get something — or anything — done before the real or perceived deadline. That’s one of the biggest reasons those decisions make few people happy.

Building a consensus before having to take action on the budget is actually quite unusual, especially when you consider how all of the biggest deficit reduction efforts of the past two decades came to be. In 1985, Gramm-Rudman-Hollings was an amendment to an increase in the national debt ceiling, and there was no serious discussion before the amendment was debated in the Senate. In 1987, a budget summit was forced by the stock market crash that occurred that October. The 1990 Andrews Air Force Base summit was the result of that year’s stalemate. The 1997 budget agreement, which was largely negotiated at an informal summit between the Clinton administration and Congressional leaders, was also largely driven by the need to have a deal in place that year.

Unless it was preceded by weeks or months of negotiations, Monday’s half-day meeting at the White House on the budget was never going to end with a one-year deal or an agreed-upon new fiscal path for the country, so it was neither surprising nor significant when there was no such announcement after the summit was over. But the Obama budget summit was still exceptionally noteworthy: It began the discussion that needed to begin so that a consensus on deficit reduction could start to be developed.

As all of the coverage the summit received proved, it more than accomplished the one thing it was trying to achieve.

Correction

I made a mistake in my Feb. 10 column, when I indicated that the reconciliation process could be used to pass another stimulus effort. Congress last year adopted a rule change that doesn’t allow reconciliation to increase the deficit, and that rule was adopted again this year. Assuming that a stimulus effort would increase the deficit, which it almost certainly would, that means that reconciliation cannot be used to put it in place. I apologize for the mistake and am grateful to those who helped me discover it.

Stan Collender is managing director at Qorvis Communications and author of “The Guide to the Federal Budget.” His blog is Capital Gains and Games.