Federal Budget

Legal commentators have argued that by keeping separate the powers of purse and sword, drafters of the U.S. Constitution encouraged battles between Congress and the president. This friction between government branches is part of the constitutionally created system of checks and balances. Discord over federal budget priorities usually resolves in short order—no politician wants the reputation of jeopardizing the national or world economy. But on rare occasions in the 1990s, budget fights led to federal government shutdowns.

In October 1990, when Democrats in Congress sought to reduce the federal deficit by implementing a surtax on the income of millionaires, Republican President GEORGE H. W. BUSH followed through on a threat to VETO any budget legislation that included tax increases. The veto effectively shut down several federal agencies. The closures lasted only three days and occurred on a weekend. Fearing negative fallout from a more extensive government shutdown, Congress and the president reached a compromise plan to reduce the federal deficit without the surtax.

Major differences in political ideologies again surfaced in the fall of 1994, when control of Congress shifted from Democrats to Republicans. The new Congress set a goal of balancing the federal budget by the year 2002, a feat that had not occurred since 1969.

Republicans, buoyed by public sentiment favoring this goal, attempted to implement their balanced budget plan in the fall of 1995. But they faced opposition from many Democrats, among them President BILL CLINTON. Although agreeing with the necessity of a balanced budget, Clinton opposed proposed cuts to entitlement programs such as MEDICARE, MEDICAID, and WELFARE. The dispute divided the branches of government as well as political parties, and in November 1995, an impasse led to the expiration of federal funding. Without adequate funding, much of the federal government—including agencies, museums, national parks, and research laboratories— ground to a halt. Some 800,000 government employees deemed "nonessential" were sent home.

Politicians on both sides of the issue faced disapproval from their constituents. Compromises were reached, and a week after it started, the shutdown was over.

Although ideological differences continued, Congress and the White House achieved a budget surplus of $69 billion in 1998. The surplus occurred three years after another partial government shutdown in December 1995 that lasted 21 days. The budget surplus increased to $122.7 billion in 1999 and $230 billion in 2000. Economists projected that the United States could pay off its debts by 2013 if the budget surpluses continued. Those surpluses, however, ended during the administration of President GEORGE W. BUSH. The Bush administration announced a record $304 billion deficit in 2003 and projected that the deficit in 2004 would be about $307 billion.