President, Congress at Odds : There’s Blame Aplenty for All, Deficit Record Shows

It was 1:30 a.m. on May 11, 1985, when one of the most dramatic moments in recent Senate history unfolded. Sen. Pete Wilson (R-Calif.), rushed by ambulance from his hospital bed to Capitol Hill, cast the decisive vote to approve a White House-supported budget plan aimed at finally bringing the federal deficit under control.

“Pete, you made the difference,” President Reagan congratulated the ailing lawmaker a few hours afterward.

But only two months later, Reagan stunned Senate Republicans by reversing field and opposing the plan because it included politically sensitive restrictions on Social Security inflation adjustments. Sen. Slade Gorton (R-Wash.) lamented: “We have lost the last best chance we had of seriously approaching a balanced budget in the foreseeable future.”

That episode, which cast a pall over subsequent efforts to reduce red ink, stands in stark contrast with Reagan’s claim at his press conference last week that Congress is the principal culprit in the budget fiascoes of the 1980s.

Indeed, as lawmakers and Administration officials sat down Tuesday to begin a round of budget negotiations under intense pressure from shaky financial markets, the record of failure to curb the federal deficit makes clear that there is plenty of blame to go around.

Just as Congress has found it impossible to resist political pressures to keep spending high and taxes low, so has the White House played a central role in every one of the key decisions along the way.

Reagan, argued former White House budget chief David A. Stockman in his book, “The Triumph of Politics,” has been “holding the American economy hostage to a reckless, unstable fiscal policy based on the politics of high spending and the doctrine of low taxes. Yet rather than acknowledge that the resulting massive buildup of public debt would eventually generate serious economic troubles, the White House proclaimed a roaring economic success.”

Last week’s crash on Wall Street is a warning sign, analysts say, that Stockman’s prophecy is uncomfortably close to reality.

The hope is that the crisis will finally force the White House and Congress to confront the deficit dilemma they have avoided for so long and help avert a worse disaster ahead.

The fear is that already it may be too late.

For the last few years, Washington has been trapped in budgetary gridlock. Democrats in Congress were unwilling to curb domestic spending substantially beyond what they had accepted in 1981. The White House, which during Reagan’s first term was dragged into approving a series of tax hikes designed to restore a portion of the $750 billion in lost revenues for the five years after the 1981 tax cut, refused to accept any more tax increases.

Downward Path

Following the failure of the Senate Republican budget package in 1985, lawmakers could agree on only one thing: putting the brakes on the defense buildup. That finally launched the deficit on a downward path from its peak of $221 billion in 1986, but it offered little hope of bringing the deficit to a level where it is sustainable over a relatively long period.

“The reason we continue to have big deficits is because the President and Congress keep getting what they want,” pointed out Rep. Leon E. Panetta (D-Monterey), one of the most influential budget figures on Capitol Hill. “The President wants defense spending and tax cuts and in the end doesn’t want to touch Social Security. Congress wants to protect (benefit programs) and domestic spending. Neither is willing to give up what they both want.”

Lawmakers tried to paper over their failures by approving the Gramm-Rudman balanced budget law in hopes that its artificial threat of indiscriminate spending cuts would force them to make the difficult choices before a real crisis developed. It did not work.

Could Rise Again

The federal deficit fell sharply to $148 billion during the fiscal year that just ended on Sept. 30, but would be expected to rise above $180 billion this year without further steps to slash the deficit.

A $23-billion deficit cut, bringing the deficit down to $157 billion, is inevitable. Under Gramm-Rudman, that much will be sliced across the board from most defense and domestic spending programs on Nov. 20 unless Congress has already achieved such deficit reductions legislatively, through either spending cuts or tax increases.

It is with that goal in mind that the congressional and Administration negotiators have begun working. But whether the $23 billion is achieved through legislative cuts or the Gramm-Rudman meat-ax, it will still leave the deficit above last year’s $148 billion.

Additional Revenue

Reagan insisted in last Thursday’s press conference that he had proposed $22 billion in additional revenue--nearly the $23 billion in deficit reduction now being sought--in the budget he sent Congress last January.

Congress has already incorporated some of those suggestions in its fiscal 1988 budget, however. Reagan proposed, for instance, to raise about $6 billion through various tax changes, including extending Medicare taxes to state and local government employees and beefing up enforcement by the Internal Revenue Service. Congress is pursuing these ideas.

But a large part of Reagan’s $22 billion would come from proposals that have been repeatedly rejected by Congress. Selling Amtrak is in this category.

Many of Reagan’s revenue proposals would provide one-time-only benefits and would only aggravate the deficit in future years. Selling government loans and assets, for example, could reap an immediate benefit of as much as $9.6 billion, but the savings would be lost over time as the income from such assets went to the private buyers.

Blamed Congress

Reagan has repeatedly blamed Congress for the record deficits under his Administration.

“The President of the United States cannot spend a nickel,” Reagan said during his televised press conference last Thursday. “Only Congress can authorize the spending of money, and for six years now I have repeatedly asked the Congress for less money and they have turned around and given more to spend and done it in such a way that I can’t veto it.”

Analysts dispute Reagan’s contention that the federal government would have saved a cumulative total of $207 billion if Congress had approved his budget proposals intact.

“The claim is totally speculative,” said Susan Joy, vice president of the nonpartisan Committee for a Responsible Federal Budget. “Those budgets were never enacted, and even if they had been, it is all but certain that the economic and technical assumptions were miscalculated.”

Cuts in Defense Spending

For one thing, Joy pointed out, the White House assumed much better economic performance in its budget projections than actually occurred. And while Congress has frequently refused to follow Reagan’s recommendations for cutting domestic spending, it has also scaled back in recent years the Pentagon spending splurge proposed by the White House.

But Reagan also has a valid point about higher spending continuing to add to the deficit, lawmakers concede.

“The American people have been told that domestic spending has been cut to the bone. That’s not true,” said Sen. Pete Domenici of New Mexico, the senior Republican on the Senate Budget Committee. “It’s gone up dramatically. It’s strange we’re telling the public we’ve cut when all we’re really talking about is a cut from a want list.”

Health, Agriculture

Spending for health services and research, for example, has soared from $27 billion to almost $40 billion between 1981 and 1987. Agriculture programs, which cost $11 billion in 1981, reached more than $31 billion in 1987.

And this year, Domenici said, Congress is contemplating “as much as $30 billion or $40 billion” in new programs. “So there must be a genuine sense of frustration in the President.”

Conservative activists complain that recent congressional decisions unleashed fears of a rising deficit.

“Congress has been signaling Wall Street and the international markets that it has no interest in cutting spending,” said Stuart M. Butler, director of domestic policy studies for the Heritage Foundation. “Already this year, it has twice overridden Reagan vetoes.”

Beside the Point

At this stage, though, lawmakers from both parties are insisting that the argument over who is to blame for the deficit is beside the point.

“The real question right now is what do we do about it,” said Sen. Phil Gramm (R-Tex.), a harsh critic of Democratic spending proposals.

“It’s the President and Congress working together that have the responsibility,” added Panetta. “We simply cannot enact spending proposals without the President’s concurrence.”

Indeed, one of the great ironies of the deficit is that Washington basically is trying to give the American public what it says it wants.

“Poll after poll shows you the vast majority of Americans think deficits should be eliminated,” said Stanley Collender, director of federal budget policy at the accounting firm of Touche Ross & Co. in Washington. “But they also say don’t touch taxes or eliminate spending to do it. It doesn’t matter whether there’s a good budget process or any process at all. It is an inescapable dilemma.”

In the end, analysts say, the deficit will come down substantially only when the White House and Congress are convinced Americans are willing to pay the price of higher taxes and less spending.