OMB May Get Power to Cut Deficit : Move Seen as Way Out of Gramm-Rudman ‘Disaster’

In the wake of the Supreme Court’s rejection last week of a key part of the Gramm-Rudman law, Congress is considering amending the law to give the President’s budget office the power to impose potentially deep spending cuts.

That power, which the original Gramm-Rudman law reserved to an arm of Congress, is a substantial one, according to federal budget experts. Although Gramm-Rudman sets a specific formula for spending cuts deep enough to meet a series of annual deficit targets, it leaves to the official ordering them the power to “fudge tremendously,” a Democratic Senate Budget Committee aide said.

“It would give an unelected official basically the power to write the budget,” added Alan Morrison, the attorney representing the congressmen who successfully sought to have the law’s key provision overturned.

Democrats Unenthusiastic

Democratic congressional leaders do not relish the prospect of turning such authority over to President Reagan’s budget office, but they fear that they could not block it. “The Supreme Court case was a disaster,” said one member of the House Democratic leadership, who asked not to be identified.

The law gave the comptroller general, who heads Congress’ General Accounting Office, the power to order cuts from most government programs if Congress failed to put the budget on a path toward being balanced by 1991. But the Supreme Court ruled that it was unconstitutional for the comptroller general, who can be removed from office only by Congress, to dictate spending cuts to be made by the government’s executive branch.

If cuts are needed to meet the deficit targets, Congress may still impose them itself through legislation. But legislation cutting a host of government programs would probably be politically unpopular, and key members of Congress are weighing two alternatives that would make the spending cuts automatic again:

--Leaving the power to order the cuts with the comptroller general but converting him to an executive branch official by making him accountable to the President instead of Congress.

--Transferring the comptroller general’s spending-cut powers to the director of the President’s Office of Management and Budget or another executive branch official.

OMB Option Gaining

In preliminary discussions on Capitol Hill, many congressional leaders have resisted the notion of converting the comptroller general, who is responsible for numerous functions beyond the Gramm-Rudman law, into an executive branch official. So the OMB option appears to be gaining strength.

House Speaker Thomas P. (Tip) O’Neill Jr. (D-Mass.) said he would prefer to leave the law alone and force Congress to enact any broad-scale spending cuts.

But he admitted that a proposal to amend the law might “sail through,” especially if it were attached to pending legislation to increase the federal debt ceiling. “That’s what I’m fearful of,” O’Neill said. Congress enacted the Gramm-Rudman law last year by attaching it to similar debt-ceiling legislation, which must be approved to keep the government operating.

Sens. Phil Gramm (R-Tex.) and Warren B. Rudman (R-N.H.), the law’s sponsors, said they plan to announce a proposal in the next few days to make the law’s automatic spending cuts constitutional.

Gramm insisted that giving OMB the job of administering the cuts would amount to nothing more than handing it “a green-eyeshade function . . . totaling up the numbers and projections.”

However, a Democratic congressional aide said that the Administration could “try to cheat or put in the President’s priorities. . . . It comes down to how much you trust the OMB.”

Ways to Cheat Cited

Morrison said the OMB could project inflation of 3% in domestic programs and 20% in defense programs. That would significantly lessen the overall burden of the cuts that would be borne by the Pentagon, despite Gramm-Rudman’s dictate that half of the reductions come from defense.

However, Gramm insisted that public scrutiny, plus independent assessments from the Congressional Budget Office, would prevent such manipulation of the figures.

Congress will be forced to confront the spending cuts for the coming year only if an Aug. 15 assessment shows that laws passed by then do not bring the fiscal 1987 deficit to within $10 billion of Gramm-Rudman’s $144-billion target. The budget resolution adopted by Congress last month envisions a deficit of about $143 billion.

But Congress still must pass a combination of spending cuts and tax increases to implement its budget. And, even if it does, the sluggish economy, by depressing tax revenues, is adding to the prospect that the Aug. 15 assessment will indicate a deficit in excess of $154 billion.