A surprising jolt of reality was handed to the Bush administration by a congressional committee this week when it voted to adopt the $50 billion savings and loan bailout plan - but make it a part of the budget instead of an off-budget item.
The modest action brought immediate cries of dismay from the administration and raised the threat of a possible veto. Yet the move makes sense. For too long, both Congress and various administrations have played games with federal spending by hiding part of it off-budget.The Bush plan for the S&L bailout - already approved by the Senate and by the House Banking Committee - calls for the creation of a new agency to borrow funds to issue $50 billion worth of bonds. The money would be used to protect depositors while closing or selling hundreds of defunct S&Ls.
The whole borrowing would be off-budget. In other words, it would be debt, but it wouldn't be counted.
What the House Ways and Means Committee did was to admit the truth and make the S&L bailout part of the federal budget. There are advantages to this, aside from facing up to fiscal reality. For example, as part of the budget, the bonds could be sold at lower Treasury rates, saving taxpayers an estimated $4.5 billion over the 30-year life of the bonds.
The complaint by the administration is that this approach undermines the whole budget agreement reached with Congress and adds another $50 billion to the deficit. It also plays havoc with Gramm-Rudman debt limits.
Acting horrified over Gramm-Rudman violations is somewhat phony since both Congress and the executive branch spend much of their time each year figuring out ways to evade those limits - while appearing to honor them. Putting the S&L bailout on budget would make it harder to keep up appearances.
Unfortunately, the committee waffled a little and agreed to exclude the $50 billion from Gramm-Rudman deficit-cutting limits. In its own way, that is another form of refusing to fact facts about the deficit.
Counting the S&L bailout as part of the regular budget could force Congress and the administration to go back and work out another budget plan. That's not all bad, since the earlier agreement was based mostly on wishful thinking and accounting gimmicks.
The Ways and Means Committee may not prevail in the long run, but the attempt to face up to budget reality is a refreshing step in the right direction. As Rep. Jim Moody, D-Wis., said: "This is a plan that is more honest. And we need more honesty in the budget process."