Congress Has Loophole on Spending Cuts

Despite disappointing economic growth and the prospect that the deficit will eventually end up well above the $144-billion target established by the Gramm-Rudman law, Congress still has an excellent chance of evading painful, indiscriminate spending cuts in next year’s federal budget, Reagan Administration and congressional officials said Tuesday.

“We could avoid (the Gramm-Rudman cuts) technically,” White House Budget Director James C. Miller III said at a briefing for reporters, “but Congress could still spend at a rate $30 billion over (the deficit target).”

The latest twist in the long-running budget soap opera arises in part from a paradox in the law, written last year by Republican Sens. Phil Gramm of Texas and Warren B. Rudman of New Hampshire, that encourages Congress to drag its feet on spending legislation.

Spending Assumption

Under the law, budget analysts are required to take a preliminary “snapshot” estimate on Aug. 15 of the budget outlook for fiscal 1987, which begins Oct. 1. But, if lawmakers have not approved individual spending measures by then, the analysts, in estimating the deficit, must assume that through next year spending for the unfunded programs will remain at current levels. The result would be a lower deficit forecast, allowing Congress to avoid making spending cuts.

In reality, by the time Congress actually decides how much to spend next year, it is likely to allot more money to many of those government programs than they are now getting. In addition, spending on defense and agriculture is likely to exceed current congressional projections.

Although the Supreme Court recently ruled that the Gramm-Rudman “automatic trigger” is unconstitutional, the law is still supposed to force Congress to balance the federal budget in 1991 by requiring lawmakers to vote on annual reductions in the deficit over a six-year period.

$10-Billion Leeway

To avoid setting in motion the complex procedures for making cuts in domestic and defense programs aimed at bringing the deficit under the mandated level, the budget estimate cannot be more than $10 billion above the fiscal 1987 deficit target of $144 billion.

As it stands today, congressional budget experts expect their projections for fiscal 1987 to show a deficit somewhere between $161 billion and $165 billion. If, by Aug. 15, Congress accepts pending legislation that would reduce the deficit by $9.2 billion, it would bring the deficit within ostensible striking distance of the $154-billion level that would avoid wide-ranging cuts.

On Tuesday, the Senate Finance Committee began piecing together its segment of that deficit-reduction package. Tentatively approved were changes in Medicare and Medicaid regulations that would reduce the deficit by almost $3 billion.

Poor GNP Discounted

Surprisingly, Tuesday’s report on economic activity--which showed that the nation’s real gross national product expanded at an anemic 1.1% annual rate during the second quarter--does not significantly worsen the budget outlook, officials said.

Senate Budget Committee Chairman Pete V. Domenici (R-N.M.) said the GNP report “takes a little pressure off” meeting the Gramm-Rudman targets. The economy actually slightly exceeded congressional expectations of 1% growth for the second quarter, although lower-than-anticipated inflation may reduce revenues somewhat.