‘87 Deficit Cuts Passed by House in ‘Magic Act’ : $15-Billion Reduction to Meet Gramm-Rudman Law Relies on Accounting Gimmicks, Windfalls

The House overwhelmingly approved legislation Wednesday that claims to cut the fiscal 1987 deficit by $15 billion--apparently enough to avoid indiscriminate reductions under the Gramm-Rudman law--despite criticism that the reductions amounted to “a magic act.”

Many of the bill’s deficit reduction measures, like those in a companion measure passed last week by the Senate, are based on accounting gimmicks and one-time windfalls, such as the sale of government assets.

Rep. Judd Gregg (R-N. H.) said that the bill “has so much smoke and fog in it that I should think we would issue everybody in this House a fog lamp.” Rep. Robert S. Walker (R-Pa.) described the legislation as “a magic act. It should not be taken seriously.”

However, with fall elections only weeks away, House Budget Committee Chairman William H. Gray III (D-Pa.) said, the bill was “the best that can be done in light of the political realities that we face.”

In particular, lawmakers were afraid to confront President Reagan’s adamant opposition to higher taxes as a means of lowering the deficit and were unable to agree on additional spending cuts.

The measure, which was passed 309 to 106, now goes to a conference committee, where House and Senate negotiators will attempt to iron out the relatively minor differences in the two versions of the legislation.

To obtain the needed amount of deficit reduction, House members resorted to such tactics as moving up by five days next month’s payment of $680 million in federal revenue-sharing funds to local governments. That means the payment would add to the deficit during this fiscal year, which ends Sept. 30, rather than being put on the books in fiscal 1987.

Another provision, beefing up Internal Revenue Service enforcement of the tax law, makes the unproved claim that it would save $2.4 billion.

Among the one-shot revenues that the bill envisions are $7 billion from sales of government loan portfolios and $2.1 billion from the sale of Conrail, the government-owned rail freight line, for which Congress has been unable to find an acceptable buyer after years of trying.

“So much of this stuff, you could just shoot holes in it. They aren’t real figures,” conceded Rep. Butler Derrick (D-S. C.), a member of the House Budget Committee who was instrumental in drafting the package.

Cites Two Options

However, he said the options remaining were either to order extensive spending cuts or “to go home in shame because we were totally unable to live up to the pledge we took last year to reduce the deficit.”

The reason for the difficult choice--and the scramble to dodge it--is the target deficit of $144 billion set for fiscal 1987 by the Gramm-Rudman law, which was enacted last year.

Unless lawmakers can bring the deficit within $10 billion of that goal--to a maximum $154 billion--by the start of the fiscal year, both houses of Congress would be forced to vote on a package of sweeping, indiscriminate reductions that would automatically hack the deficit to $144 billion.

The House and Senate had agreed earlier this year on a budget resolution that claimed to meet the target, but a joint White House-congressional estimate in August indicated that the deficit was about $20 billion higher than had been expected.

Veto Looms

The White House has threatened to veto the House version of the legislation, citing 17 separate provisions to which the Reagan Administration objects. Among them is one requiring $1 billion in reductions to be spread among most government programs, including the Defense Department. However, many of the disputed provisions may be dropped when the bill emerges from the conference committee.

As they head into the final days of this year’s session, both houses have yet to vote on separate legislation that would roll all 13 of Congress’ regular spending bills into one. Passage of the measure, which has become an annual exercise, is needed because none of the bills were completed during the regular congressional schedule this year.