The Debtors’ Game

There is nothing Congress can do to sugarcoat the fact that the nation now is $2 trillion in debt. So the proper course for the House and Senate now is to raise the debt ceiling so that government can continue to function. This can be done in a matter of hours--no smoke, no mirrors, no flimflam.

Then, if they want to protect their political flanks, the lawmakers can adopt goals for budget deficit reduction for future years and outline targets for defense spending, domestic outlays and potential tax increases. They can title the result “The Deficit Elimination Act of 1985” and declare victory over the deficit.

But it is folly for 57 senators and representatives to waste more time in conference trying to make something out of the slapdash Gramm-Rudman-Hollings deficit-reduction bill passed by a Senate that had little idea of what it was voting for.

The plan would set an annual deficit ceiling starting with a base of $180 billion in 1986. The ceiling would decline by $36 billion each year until, presumably, the deficit hit zero by 1991. Unless each year’s budget came close to the $36-billion reduction, the President could cut spending (or raise taxes) at will until the $36 billion in savings was achieved. This assumes that Congress will not merely raise the non-binding ceiling whenever the going gets tough, or, once the 1986 election is over.

Arbitrary cuts just don’t work. They ignore economic and budgetary reality. Under Gramm et al., Congress would not be assuming bold new responsibility for deficit reduction, but abdicating the budget process to the White House.

The starting point for real deficit reduction is to realize how we came to be $2 trillion in debt.

In January of 1981, the debt limit was $935 billion. It was not raised to the $1-trillion mark until 10 months into the President’s first term. Federal tax collections have declined from 20.8% of gross national product to 18.6%. Defense spending has risen from 23.2% of the federal budget to 29.3%. Spending for human needs has declined from 53% to 48.9% and for physical resources from 11.2% to 5.3%. Interest on the federal debt has risen from 10.1% to 14.9% of the budget. In sum, taxes have been cut, defense spending has soared and debt interest has become a major, untouchable portion of the budget. Everything else has suffered.

The President has always claimed that profligate domestic spending creates deficits. But in a speech last week, Reagan said, “If we had gotten all the spending cuts that we asked for in 1981, the deficit would be $50 billion less than it is right now.” In other words, the deficit for this past year would have been only $160 billion rather than $210 billion.

Thus, the President himself has put the domestic spending fallacy to rest. If you keep inviolate the tax cuts, national security and debt service, there just is not enough left in the budget to squeeze out $36 billion a whack. The one certain way to make a substantial reduction in the deficit without further shredding of the domestic safety net is to raise taxes in combination with judicious budget cuts.

Some Republican supporters portray the measure as a clever way of tricking the President into accepting a tax increase. But those who believe they can put a monkey on back of a popular President should remember the old joke: Where does a 600-pound gorilla sit? Anywhere it wants to.

Deficit reduction is the nation’s No. 1 domestic problem. But games-playing or gorilla-wrestling will only postpone the inevitable.