Spending Cuts Nearing Reality Under New Law

When House Democrats gathered at an idyllic mountain retreat in West Virginia last weekend, three representatives offered a musical lament for the free-spending epoch that seemed to end with passage of the budget-balancing law sponsored by Republican Sens. Phil Gramm of Texas and Warren B. Rudman of New Hampshire.

To the tune of “The Way We Were,” Reps. Marcy Kaptur and Mary Rose Oakar of Ohio and Barbara Boxer of Greenbrae sang: “Memories, of the days before Phil Gramm, lovely budget spending memories, of the way we were.”

After four straight years of deficits in the range of $200 billion, Congress takes up the fiscal 1987 budget proposal, which President Reagan submitted Wednesday, under entirely new circumstances. And the law that has created the new circumstances is a brutal but inventive mechanism for turning what was once politically impossible into something that is now at least politically conceivable.

‘Doomsday Machine’

The Gramm-Rudman measure, which is designed to force a balanced budget by 1991, directs Congress and the Administration to agree by the end of September on a plan to slash next year’s deficit to $144 billion. If they do not, the Gramm-Rudman “doomsday machine,” as some call it, would automatically go into action chewing huge bites out of practically everything in its path.

Although more than half the federal budget--including Social Security, Medicare and several anti-poverty programs--would be largely spared the budget knife, thousands of remaining defense and domestic government programs would be subject to drastic across-the-board spending cuts of as much as 25%. The process will go forward unless the Supreme Court declares it unconstitutional or Congress rescinds the law.

Many of those who have tried the hardest in the past--and failed--to rein in the deficit argue that only the prospect of Gramm-Rudman’s indiscriminate cuts taking effect Oct. 1, barely a month before Election Day, can force Congress to hammer out an agreement on more orderly reductions.

“All the rational approaches have failed us,” says Rep. Bill Gradison (R-Ohio). “We turned to Gramm-Rudman because it’s such an irrational approach.”

Strategy Not Irrational

To budget specialist John F. Cogan and some others, the strategy behind Gramm-Rudman may be crude but it is not irrational. Cogan, until recently a top aide to former Budget Director David A. Stockman and now a fellow at the Hoover Institution in Palo Alto, says that the act fundamentally changes the rules of the budget-writing process.

“Before, there was almost no incentive for anyone in the government to cut the deficit because the status quo was painless,” he said. “Now, there’s no way to avoid the pain.”

With so much at stake if they fail, many lawmakers are convinced that, after months of posturing and rhetorical jousting, they ultimately will reach agreement with Reagan to prune some domestic programs, restrain the defense buildup and modestly boost taxes.

“There’s no way you can fix the deficit just with taxes,” says Senate Budget Committee Chairman Pete V. Domenici (R-N.M.). “Conversely, there’s no way you can fix the deficit with just budget cuts. So you need some of both.”

There is another possibility, however: that Gramm-Rudman’s Rube Goldberg-like procedures will make it even more difficult to break the budget deadlock that has prevailed in recent years.

New Incentives

“Gramm-Rudman will provide many members with new incentives to dig in their heels and refuse all compromise,” Alfred J. Watkins, a senior economist at Washington’s Roosevelt Center for American Policy Studies, suggests. “Perversely, it could make stalemate the most palatable--the most politically feasible--game in town.”

If Congress becomes convinced that automatic cuts are inevitable, that could set off a mad scramble among members to protect their favorite government programs. Gramm-Rudman requires that automatic cuts for each program be subtracted from its last regular spending bill approved by Congress. Thus the best way to prevent a program from being cut deeply by Gramm-Rudman is to oppose any initial cuts during the appropriation stage.

That could turn out to be a prescription for congressional stonewalling.

“No one will accept a big up front reduction in their program unless they are convinced that everybody else will agree to an overall compromise that would avoid the automatic cuts,” said Sen. Nancy Landon Kassebaum (R-Kan.). “If we can’t work out a bipartisan agreement that everybody can accept, the danger is that nobody will be willing to go first.”

First Round of Cuts

The first round of automatic cuts under Gramm-Rudman, totaling $11.7 billion, is scheduled to take effect on March 1, with unprotected domestic programs taking a 4.3% bite and unshielded defense operations absorbing a 4.9% reduction. Cuts of that size are not trifling, but they are not considered politically lethal.

In fiscal 1987, however, the year covered by Reagan’s new budget, the automatic cuts would reach a more painful $38 billion, by the Administration’s relatively optimistic estimate, if Congress failed to reduce the deficit on its own.

Some lawmakers began pushing to overturn the Gramm-Rudman law even before it was approved. A constitutional challenge to the measure, led by Rep. Mike Synar (D-Okla.) and a union representing Treasury Department employees, is pending before a three-judge panel of the U.S. Court of Appeals.

Ultimately, the Supreme Court is expected to settle the issue this summer.