House OKs Deficit Plan, Debt Limit : Uses Spending Ceiling to Force Senate to Concur or Risk Raid on Trust Funds

The Democratic-controlled House defiantly passed its own deficit-slashing plan Friday and separately approved a brief hike in the national debt ceiling, thus daring the Republican Senate to concur or risk a costly midnight raid on Social Security trust funds to keep government checks from bouncing.

The 249-180 party-line vote for the House deficit-reduction plan escalated a game of hard-ball politics played by leaders of both parties as they wrangled over competing plans to force a balanced federal budget and extend government borrowing power. The Senate remained in session late into the night Friday to debate how to respond to the House, which adjourned after acting.

Social Security and two other pension funds became the latest pawns in that tussle when the Treasury Department warned that it would be forced to sell long-term securities held by those funds to raise cash if Congress failed to raise the debt ceiling from $1.8 trillion to $2 trillion by the end of the day Friday.

The House attached its deficit-slashing plan to the measure raising the debt ceiling to $2 trillion and, by a 357-61 vote, passed a separate bill that would raise the debt ceiling by $17 billion and provide the government with enough new borrowing power to continue operating through Wednesday. That would give lawmakers a few more days to reconcile differences over the competing deficit-cutting packages before the need for a new sale of securities from the trust funds.

Senate Formula Rejected

The Senate complicated the effort to raise the debt ceiling last month by attaching to its bill a measure designed to balance the federal budget by 1991. The House refused to accept the Senate formula, and the bill it approved Friday aims for a balanced budget by 1990.

The government’s borrowing authority expired a month ago, and Treasury officials said earlier in the week that they kept the government operating only by selling securities from Social Security and two other pension funds. They said that the sale, which raised $17 billion to cover checks to 36 million Social Security beneficiaries and 3 million retired federal workers and railroad employees, resulted in the loss of $70 million in potential earnings in October.

Democrats contend that a repetition of the maneuver ultimately could cost the government as much as $2 billion. Republicans and Democrats are blaming each other for prolonging the government financing crisis and risking harm to the politically sacrosanct trust funds, normally earmarked only for the benefit of pensioners.

In a clear move to increase the political pressure, the House immediately adjourned after approving the measure to balance the budget by 1990. That forced the Senate either to go along with the small increase in the debt ceiling--something Senate Majority Leader Bob Dole (R-Kan.) previously had ruled out--or to take the political heat for raiding the trust funds again.

The balanced-budget measure passed by the Senate, sponsored by Republicans Phil Gramm of Texas and Warren B. Rudman of New Hampshire, would set annual deficit ceilings declining to zero in 1991. If Congress failed to pass a combination of spending cuts and tax increases by the start of each fiscal year, the President would be required to impose proportional spending cuts in most government programs, including defense but excepting Social Security.

The measure that the House passed Friday contemplates deeper and faster deficit cuts than the Senate version, bringing the budget into balance by 1990. Unlike the Gramm-Rudman package, the House plan would exempt several programs earmarked for the poor from the automatic spending cuts.

The House acted after a House-Senate conference committee collapsed in disarray Thursday following its failure to negotiate a balanced-budget measure.

House Democrats attacked the Gramm-Rudman measure as a gimmick designed to let Republicans take immediate credit for forcing a balanced budget while delaying any painful spending cuts until after the 1986 congressional elections. Those elections are crucial to GOP hopes to retain the slim Republican hold on the Senate.

Differences Cited

“There are three differences between the (Democratic and Republican) plans,” Rep. Charles E. Schumer (D-N. Y.) told a raucous House chamber. “No. 1 is our plan starts now and their plan doesn’t until after the election. No. 2 is our plan starts now and their plan doesn’t until after the election. And No. 3 is our plan starts now and their plan doesn’t until after the election.”

But Republicans, questioning the sincerity of the Democratic alternative, charged that it had been laced with legislative time bombs designed to ensure that it would eventually be declared unconstitional and never go into effect.

“It’s a shell game,” Rep. Connie Mack (R-Fla.) charged. “It was designed to self-destruct.”

Only two Democrats, Paul E. Kanjorski of Pennsylvania and George W. Crockett Jr. of Michigan, broke ranks and voted against the House deficit-cutting plan. Rep. John Paul Hammerschmidt of Arkansas was the only Republican to vote for the Democratic proposal.

Deficit Figures Vary

Beyond aiming for a balanced budget one year earlier, the House-passed plan differs from the modified Senate plan in a number of significant ways:

--Under the Senate plan, the maximum deficit for the current fiscal year would be $171.9 billion--exactly the deficit currently projected. The House plan, by setting a first-year deficit target of $161 billion, would require some immediate spending cuts.

--The House version would allow greater flexibility with the deficit targets than the Senate version if the economy fell into recession.

--The House version would exempt several costly programs for the poor, including food stamps, Aid to Families with Dependent Children, Supplemental Security Income and veterans’ pensions, from any automatic spending cuts imposed as a result of failure to meet deficit targets.

--Under the Senate approach, deficit forecasts prepared by the Congressional Budget Office and the Administration’s Office of Management and Budget would be averaged to determine whether deficits exceeded their annual targets. The House version would rely only on the nonpartisan Congressional Budget Office, a feature that Republicans charge could imperil the constitutionality of the measure because it would deprive the President of his administrative authority.

--The House plan but not its Senate counterpart includes a clause expediting procedures for a judicial review and stipulates that the entire package would be nullified if a court found any part of it to be unconstitutional.