By Stan Collender, NationalJournal.com
© National Journal Group Inc.
Wednesday, Sept. 6, 2006

Office of Management and Budget Director Rob Portman went out of his way when the Bush administration's midsession review was released in July to say the White House absolutely did not game the numbers and that the large drop in the projected FY06 deficit was legitimate.

	Over the years spending often has been accelerated to make the following year's deficit look like it was improving and slowed when the current year's deficit needed to look as small as possible.

It was clearly one of Portman's primary talking points. During calls he initiated to reporters later in the day, he reiterated that the big change in the deficit outlook was genuine, completely justifiable and reasonable. He was both defensive and defiant.

That's why it will be interesting to see how Portman responds to the rumors that began to circulate in late August that the White House is planning to drive this year's deficit down as far as possible by delaying payments to government contractors until after Sept. 30.

This would hardly be the first time federal spending has been manipulated like this. Over the years, spending often has been accelerated to make the following year's deficit look like it was improving and slowed when the current year's deficit needed to look as small as possible. Sometimes it has been done with congressional involvement: The House and Senate have passed legislation delaying or accelerating a payday, for example. At other times it has been accomplished simply by White House fiat.

From a purely logistical point of view, the budget planets are aligned properly for this to happen this year. The last day of FY06 is a Saturday, so it will not be that difficult to slow payments and prevent the outlays from occurring until the first working day of FY07 -- the following Monday.

This makes a great deal of sense politically, so it would not be surprising if the White House is actually thinking about doing it.

The objective would be to lower the FY06 deficit as much as possible before the November election. The final numbers for a fiscal year are typically reported in the second or third week in October. Budget results that are better than the lower-than-projected deficit the White House announced with such over-the-top fanfare in July would provide another opportunity for a self-congratulatory event just weeks before Election Day. This would give the president a second bite at the budget media apple and provide a chance for a positive statement about the economy and spending cuts that Republican candidates could use in their campaigns.

In addition, if the Democrats take over one or both houses of Congress in November, the greater spending and higher FY07 deficit would be blamed on them. The additional FY07 outlays caused by the delay would also increase pressure on Democrats during the FY08 budget debate to cut spending.

But however smart it might be politically, budget-wise this type of fiscal sleight-of-hand makes no sense at all. Delaying spending so that it doesn't occur in FY06 doesn't mean that a program has been cut; the spending that should have occurred this year will simply happen next year. The timing of the increase in the government's debt may change but ultimately it will increase by the same amount. The bond market won't be fooled and interest rates won't be affected.

The most interesting aspect of this ploy is what it would say about the Bush administration's overall federal budget thinking and planning: very short-term. It would point to two more years of budget positions and decisions that ignore or give short shrift to the long-term implications of what is being proposed. Regardless of their impact on the deficit, proposed tax cuts and spending increases -- probably including large changes -- should all be anticipated.

There are several things to watch over the next few weeks to see whether the rumored delay in federal payments is true.

First, is the government contracting community becoming publicly agitated? Payments to contractors are most vulnerable if a slowdown occurs and a one- or two-week delay could mean cash flow problems for many businesses.

Second, does OMB Director Portman make as aggressive a statement about not gaming the system as he did when the midsession budget review was released?

Third, do Wall Street estimates of short-term government spending change in the next few weeks?

Finally, is a budget-related media event at the White House or on the campaign trail tentatively scheduled for the second to third week in October?

Question Of The Week
Previous Question. The "Question of the Week" from Aug. 22 asked for the first year the federal deficit exceeded $100 billion. It provided several hints. This was the same year when David Stockman was director of the Office of Management and Budget, "Fast Times At Ridgemont High" was one of the big hit movies, "Cats" opened on Broadway, and John Belushi died. The year was... 1982 and the winner of the "I Won A 2006 Budget Battle" pennant, who was selected at random from all those who submitted the correct response, is Gregory Wright, public policy and legislative coordinator for the San Gabriel Valley Economic Partnership in Irwindale, California.

This Week's Question. It's time to ask the traditional question "Budget Battles" asks every year at this time. It's also another question where you don't need to know anything about the budget to make a guess and get a shot at winning a fabulous "I Won A 2006 Budget Battle" pennant. When Congress returns to work this week there will be 24 calendar days but only about 15 legislative days left before the start of FY07. None of the appropriations bills for the coming fiscal year have been enacted yet.

The question: How many of the regular appropriation conference reports will be passed by the House and Senate and sent to the White House by the start of FY07?

Click here to send in your response, which must be received by 8 p.m. EDT Saturday, Sept. 9, 2006. You must include a mailing address so we can send you an "I Won A 2006 Budget Battle" pennant if you win. If more than one person submits a similar winning response, the winner will be selected at random from that group.

Note to government employees: Because of security procedures at many offices and facilities, your home address will be the best way to make sure the pennant actually gets to you.

-- Stan Collender is a NationalJournal.com contributing editor and managing director at Qorvis Communications in Washington, D.C. A frequent speaker on the budget and the economy to audiences across the country, he is also author of "The Guide to the Federal Budget." His e-mail address is secollender@nationaljournal.com.

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