Dancing Around the Deficit

Few problems have prompted more political posturing, and less effective action, than the federal deficit. Despite a penchant for proposing panaceas, Congress has never found a way to kick its habit of overspending and surrendering to special interests. So last week, with an air of desperation, it concocted a magic cure-all and prepared to swallow it, knowing little about its efficacy or possible side effects. Faced with the necessity of raising the ceiling on the accumulated national debt to more than $2 trillion, about 120% higher than when Ronald Reagan took office, the Senate’s Republican leadership hastily pushed through a radical plan that would surrender some of Congress’s constitutional power to set budget levels and give the President unprecedented control over the Government’s funds.

The proposal, drafted by Republicans Phil Gramm of Texas and Warren Rudman of New Hampshire, prohibits the federal budget from exceeding a specified deficit ceiling that would decline steadily over the next six years. Beginning with a limit of $180 billion (with a 7% leeway) for fiscal 1986, the deficit would drop roughly $36 billion each year, reaching zero in 1991. If the Office of Management and Budget and the Congressional Budget Office project that the deficit for a given year will exceed the prescribed limit, then the President will have to order spending cuts to meet the required ceiling. Certain areas, however, would be exempt, most notably Social Security, interest on the national debt and some Pentagon contracts. Thus only about one-third of the budget would be subject to cuts. The vulnerable targets would be domestic entitlement programs, such as food stamps and Medicare, as well as a large chunk of the operating budget for the military and other Government agencies.

Majority Leader Robert Dole attached the plan to the debt-ceiling bill and brought it to a vote without any committee hearings or expert testimony, despite its far-reaching ramifications and unfathomed complexities. The Treasury added a sense of urgency to the proceedings by claiming that there would be no cash to cover Government checks as of last week if the debt- ceiling bill were delayed. Deputy Treasury Secretary Richard Darman wrote a letter to Dole warning that once the department’s cash balance was exhausted, the nation’s banks would be instructed not to honor its checks. With the threat of Social Security checks and federal paychecks bouncing all over the country, Dole urged the Senate to move fast.

In rushing the measure through, Dole, a man generally considered rather sensible, offered a bizarre argument. It “is not a requirement here to know everything about a piece of legislation,” said he. “In fact it is not a requirement to know anything about it.” He suggested that the Senate, which fancies itself “the greatest deliberative body in the world,” not concern itself with studying the proposal because modifications could be made when it came time to compromise with the House over whatever version it might pass.

Critics of the bill claimed that it would impart too much power to the President, undercutting Congress’s authority over the federal budget. Some Democrats charged that the amendment was simply a political contrivance to permit Senators to claim credit for action on the deficit while actually putting off any painful spending cuts until after the 1986 elections. They also suspected that it would force dismantling of most of the country’s social programs.

Louisiana Democrat J. Bennett Johnston, known for his moderation in word | and thought, called Gramm-Rudman “the most far-reaching, the most horrendous, the most damaging to the constitutional process and the most extreme piece of legislation” he had seen during his 12 1/2 years in the Senate. Although many of his colleagues privately agreed, most Democrats realized they had been outmaneuvered by the Republicans, who seemed to be taking a serious stand for deficit reduction. When the time came to vote publicly, the measure passed, 75 to 24.

In the House, Speaker Tip O’Neill called the amendment “a fraud” and “a disgraceful maneuver to subvert the Constitution.” But his colleagues were anxious not to appear soft on the deficit. By a 354-to-15 vote, they instructed their conferees to accept some version of the deficit-reduction plan when a House-Senate conference committee takes up the legislation to raise the debt ceiling this week. “We don’t need extensive hearings,” said House Republican Leader Robert Michel of Illinois. “What we need is old- fashioned guts.”

The circus-like atmosphere surrounding the bill was exacerbated by the Reagan Administration. At first it was a bit wary of a plan that might force unwanted cuts in defense or other programs, or a rise in taxes. Then, as the notion gathered momentum among Senators who feared raising the debt ceiling without some showy way of posturing against deficits, the President belatedly gave it a grand public embrace (after the plan was stretched out to push the hardest choices onto Reagan’s successor). Treasury Secretary James Baker helped hold members’ feet to the fire by issuing dire warnings about the need to pass the debt-ceiling package immediately. But just as the House was preparing to consider the debt ceiling and its attached deficit-reduction plan, the Treasury, compelled by financial realities, turned down the heat by tapping into $5 billion worth of borrowing authority of the Federal Financing Bank, an obscure organization that assists independent federal agencies issue their securities. Some $10 billion is left in the fund, so the Government can keep operating at least another three weeks while House and Senate conferees refine the proposal.

Dole was livid. By giving Congress a short reprieve, he said, “the Treasury pulled the plug” on the Gramm-Rudman amendment. “I think Treasury should have hung in there.” Baker, insisting that the Administration still strongly supports the measure, said he had no choice but to do everything possible to keep the Government’s checks from bouncing.

Both its critics and supporters concede that the Gramm-Rudman proposal is an act of desperation. But, say its advocates, these are desperate times. Congress has shown that it cannot cut the deficit without some radical new constraints on the way it writes budgets. The danger lies less in the rationale behind the plan than in the haste with which it was conceived. Even some of its most fervent public supporters privately hope that given the extra few days of deliberations, refinements can be added in the House-Senate conference committee to make the measure more flexible.

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