Congress Passes Bill to End Deficits : President Will Sign Measure Today Requiring Balanced Budget by 1991

Congress, which for years has resisted deep spending cuts, approved a bill late Wednesday designed to balance the budget within five years, and the White House said President Reagan would sign it first thing this morning.

The balanced-budget bill was part of a measure to increase the national debt ceiling from $1.8 trillion to more than $2 trillion. Without the increase, the government as of today would have lacked the authority to borrow the money it needs to keep operating.

Senate Finance Committee Chairman Bob Packwood (R-Ore.), calling the bill a “historical watershed,” said it represented “the last significant opportunity to deal with the deficit.”

But the 61-31 vote in the Republican-controlled Senate represented a substantial drop from the 75 senators who voted for the proposal during a preliminary vote in October. Republicans supported the bill 39 to 9, and Democrats split 22 to 22.

House Vote Is 271 to 154

The final tally in the Democratic House was 271 to 154, with strong liberals and conservatives frequently voting no but the moderates of each party voting yes. Republicans voted for the bill by 153 to 24, while only 118 Democrats supported the measure and 130 opposed it.

If fully implemented, the so-called Gramm-Rudman initiative--the brainchild of Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.)--would force sweeping changes in the way Congress and the White House make budgets and spend money.

Across-the-board spending cuts--falling equally on defense and the rest of the budget but exempting Social Security and benefit programs for the poor--would take effect automatically if Congress failed to meet a schedule of declining deficits, beginning with $171.9 billion this year and declining to zero by 1991. Last year’s deficit was $212 billion.

Among congressional critics, House Budget Committee Chairman William H. Gray III (D-Pa.) called the Gramm-Rudman bill a “look, ma, no hands approach to government” that was designed to let lawmakers escape responsibility for tough spending cuts sure to anger special interests.

A Fiscal Straitjacket

In the end, however, the overwhelming support for the package in both the House and the Senate demonstrated that Congress was willing to put itself in a fiscal straitjacket because it lacked the discipline to cut deficits on its own.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) acknowledged that the automatic spending cuts would limit congressional flexibility to make budget policy, but he said Congress has proved unable to control the deficit on its own. The bill is needed, he said, to offset pressure from special interests to force federal spending ever upward.

“It’s not the best way to manage a country such as ours, but we have gridlock, political gridlock,” Domenici argued.

But Sen. J. Bennett Johnston (D-La.) used the theme of an old radio mystery program to warn that the bill opened the door to a host of unforeseen fiscal and political pitfalls.

“Who knows what evil lurks in the minds of men? The Shadow knows,” Johnston said, repeating the program’s famous opening line. “Well, who knows what evil lurks in the heart of Gramm-Rudman? Nobody knows.”

Of California’s two senators, Democrat Alan Cranston voted against the measure and Republican Pete Wilson voted for it. Cranston said the program sought to reduce “our horrendous deficits by unthinking, unnecessary, unwarranted and perhaps unconstitutional means” while dangerously enhancing Reagan’s power to decide “how much the nation should spend and for what purposes.”

The prospect of automatic spending cuts has outraged a wide variety of interest groups, from the Defense Department to the nation’s mayors.

As recently as Tuesday, a Defense Department spokesman said the bill “could be disruptive and damaging” to Reagan’s defense buildup.

And at the National League of Cities meeting in Seattle, Cleveland Mayor George V. Voinovich, the organization’s outgoing chairman, said that members of Congress went along with Gramm-Rudman because they are “worried about their political hides” and afraid of a needed tax increase.

A ‘Meat-Ax Approach’

Voinovich’s successor, San Antonio Mayor Henry Cisneros, warned that the bill would promote a “meat-ax approach” to urban policy.

While the approval of the Gramm-Rudman bill permitted the enactment of the debt ceiling increase and assured the government’s power to continue borrowing money, several major agencies, including the Defense Department, will lose their authority to spend that money at midnight tonight unless House-Senate negotiators can agree on a stopgap spending measure.

The House-Senate committee met late into the night Wednesday in an effort to write a spending bill but was having trouble agreeing on a measure that would satisfy the objections of the President. In Reagan’s view, both the House and Senate bills provided too much money for domestic programs and too little for defense.

Simple in Concept

The Gramm-Rudman measure, though simple in concept, proved exceedingly difficult to reduce to legislative language. Lawmakers spent more than two months thrashing out both technical and political differences.

The final version would impose a series of descending deficit ceilings, starting with $171.9 billion for the current 1986 fiscal year and declining to zero by fiscal 1991, which begins Oct. 1, 1990.

If Congress failed to enact tax and spending legislation in accord with the deficit ceiling for any year, across-the-board spending cuts, falling equally on defense and non-defense programs, would take effect automatically.

For this fiscal year, which began Oct. 1, the automatic spending cuts would take effect next March 1. They would be limited to about $11.7 billion, even if the deficit exceeded the $171.9 billion ceiling by more than that.

In the military budget, the bill would spare pay or benefits of uniformed personnel for fiscal 1986, and the President could save some military programs from cuts in 1986 if he made additional cuts from closely related programs.

The bill would allow Congress to temporarily waive the deficit targets and budget cuts in times of war or recession.

Because the bill’s constitutionality is likely to be challenged in the courts, it includes language ordering the courts to expedite consideration of such challenges.

HOW GRAMM-RUDMAN BILL WOULD WORK

Here, using the 1987 fiscal year as an example, is how the Gramm-Rudman bill would work in practice:

Feb. 5, 1986: President Reagan proposes his budget for fiscal 1987, which begins the following Oct. 1. James C. Miller III, Reagan’ budget director, has already promised that his proposed 1987 deficit will meet the Gramm-Rudman target for that year --$144 billion.

Spring and Summer: Congress enacts a fiscal 1987 budget and the spending and tax legislation required to implement that budget.

Aug. 20: the President’s Office of Management and Budget and the Congressional Budget Office estimate the size of the 1987 deficit, based on congressional action through Aug. 15.

Aug. 25: Congress’ General Accounting Office makes the final determination of the deficit by choosing the OMB estimate, the CBO estimate or the average of the two.

Sept. 1: If the deficit estimate exceeds $144 billion, the President must issue an order reducing 1987 spending enough to eliminate the payments, Social Security, veteran’s compensation and pensions and seven benefit programs for the poor are exempt that Medicare and other health benefit programs may be cut by no more than 2%.

September: Congress has one more month to pass tax and spending legislation that would bring the 1987 deficit below $144 billion.

Oct. 1: If Congress fails, the President’s spending cut order takes effect.