The Supreme Court's decision Monday to discard a key provision of the Gramm-Rudman law, coupled with signs that public concern over the deficit is evaporating, promises to make it more difficult for an already reluctant Congress to move the federal budget toward balance.
"Everybody was kind of sitting back in the false comfort that Gramm-Rudman would take care of everything," said Rep. Leon E. Panetta (D-Monterey), who had been instrumental in the law's enactment. Now, he said, Congress will have to make the difficult decisions for itself.
The Supreme Court knocked out the provision that would have imposed automatic spending cuts in a wide range of federal programs if Congress fell short of its deficit-reduction targets, as many believed it would.
However, the court let stand a fallback procedure that would force a congressional vote on whether to make the same reductions that would have been automatic under the original law. In essence, that will force lawmakers to make a painful choice between unpopular spending cuts and failing to live up to their promises to cut the deficit.
"In the final analysis," Senate Majority Leader Bob Dole (R-Kan.) said, "the only way we are going to reduce the federal deficit is for Congress to face up to it."
Congress passed a budget a week ago that would bring the deficit for fiscal 1987, which begins Oct. 1, to $143 billion. That would be about $30 billion below the projected deficit under current tax and spending laws and $1 billion lower than the Gramm-Rudman law's target for that year.
Effect of Economy
However, a slowing economy could easily throw that projection off track--by up to $15 billion, according to some projections. And there is no guarantee that Congress will heed its budget, which lacks the force of law, as it passes actual spending and tax legislation.
Despite the worsening deficit outlook, Dole said, polls indicate that "the deficit has disappeared in the public view. . . . I think (voters) must feel either that we addressed it, or that we are hopeless and we are not going to address it. It's probably the latter."
Coming at a time when the economy's vigor seems unaffected by deficits running at roughly $200 billion a year, such voter apathy could remove any remaining incentive for Congress to embark on Gramm-Rudman's tortuous five-year path toward a balanced budget in 1991.
Indeed, a new round of political struggles over how--and even whether--to cut spending broke out within hours of the announcement of the court decision. The National Treasury Employees Union announced a lawsuit demanding cost-of-living increases retroactive to Jan. 1 to federal retirees who were denied their regular January increase.
Congress Given 60 Days
The loss of the cost-of-living increase, at a saving to the government of more than $1 billion, was among $11.7 billion worth of automatic spending reductions that the Gramm-Rudman law triggered for the current fiscal year. The Supreme Court, as part of Monday's decision, gave Congress 60 days to approve those cuts in legislative form. Otherwise they will become void.
Congressional leaders and the Reagan Administration unanimously called on Congress to confirm the cuts. "Fast action . . . will demonstrate again that Congress shares the desire of the American people for a stable fiscal policy," House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.) said.
Failure to enact the 1986 cuts would have reverberations in 1987 by adding new momentum to federal spending. Congressional budget experts said that the 1986 cuts--assuming they were not restored for 1987--would trim $18 billion from the 1987 deficit. If the 1986 cuts are reversed, achieving the 1987 deficit target would become $18 billion more difficult.
Congress will begin facing the 1987 predicament in earnest on Aug. 15, when the Congressional Budget Office and the White House's Office of Management and Budget are required by the Gramm-Rudman law to forecast the 1987 deficit based on spending and tax laws then on the books.
If that projection exceeds the Gramm-Rudman law's $144-billion deficit target by $10 billion or more--an increasingly likely prospect--Congress will face a variety of unpleasant choices.
It could try to work out an agreement with the Reagan Administration to adopt new taxes--possibly as part of sweeping tax overhaul legislation already passed by both houses--or additional spending cuts. However, President Reagan has vowed not to accept additional taxes, and Congress has refused to accept the domestic spending reductions that Reagan demanded.
Short of that, the Gramm-Rudman law would continue to require Congress' comptroller general to prepare a package of wide-ranging spending cuts deep enough to reach the $144-billion target. The cuts would come equally from domestic programs and defense and, except for Social Security and other programs specifically exempted by Gramm-Rudman, would be proportionally equal in all programs.
Before Monday's Supreme Court ruling, those cuts would have taken effect automatically on Oct. 1. Now they would become effective only if Congress enacted them into law.
Reagan Signature Needed
If Congress approved such legislation--which is far from certain--it would require the signature of President Reagan, who would be forced to confront a deficit-reduction package including deep cuts in military spending.
Would he sign it? Several weeks ago, OMB Director James C. Miller III said: "I would anticipate the President signing such a joint resolution, if it came to that."
He said Monday that he hopes it would never come to that. But if Congress fails to adopt sufficient domestic spending cuts to reach the Gramm-Rudman deficit target, Miller said, Reagan would support an across-the-board spending cut to reach the target.
Hope to Correct Problems
The authors of the Gramm-Rudman law, Sens. Phil Gramm (R-Tex.), Warren B. Rudman (R-N.H.) and Ernest F. Hollings (D-S.C.), hope to head off the problem by correcting the constitutional problems in the law.
Gramm proposed a bill that would remove Congress' power to fire the comptroller general. Times staff writers Michael Wines and Laralyn Sasaki also contributed to this story.