Bush May Use Gramm-Rudman as Club

Advisers to President-elect George Bush are considering a budget strategy in which Bush would warn Congress soon after taking office that he is willing to swallow automatic, indiscriminate spending cuts under the Gramm-Rudman budget law rather than tolerate a tax hike.

That strategy, according to aides and congressional sources, would erase the widespread belief that Bush will back away from his campaign pledge not to increase taxes. And it would increase pressure on Congress to rely on spending cuts alone to avert the meat-ax cuts that the Gramm-Rudman law would impose.

“The role of Gramm-Rudman is one of the major points of leverage we’re going to have,” said a senior Bush adviser who was also an official in the Reagan Administration. “And you can be sure that people here are much more willing to consider the reality of (automatic cuts) than anybody was under President Reagan.”

Confrontational Approach

These first signs of Bush’s potential budget strategy raise the possibility that he will follow a riskier, more confrontational approach than that of the Reagan White House. Despite his stern language, Reagan repeatedly agreed to postpone budgetary deadlines and was willing to compromise with Congress on defense spending and some hidden tax hikes to avoid the Gramm-Rudman budget ax.

Under the Gramm-Rudman balanced budget law, the White House is required to impose automatic spending cuts next Oct. 1 if Congress fails to reach agreement by then on a budget plan that includes a deficit of less than $110 billion. The automatic cuts, which exempt Social Security and benefits for the poor, would slice equally into defense and other domestic programs to reduce the projected fiscal 1990 deficit to $100 billion.

Bush officials have already indicated that he would be willing to scale back the defense spending that Reagan will include in the fiscal 1990 budget he will submit to Congress on Jan. 9. Reagan will ask for a 2% increase beyond inflation, but Bush is expected to accept a Pentagon budget that would grow no faster than inflation.

Even that would leave the deficit at $125 billion or more, according to budget aides, without tax increases or domestic spending cuts.

‘Doomsday Machinery’

But, for Bush, relying on the “doomsday machinery” of Gramm-Rudman to enforce his no-tax pledge would be decidedly risky. Democrats in Congress might call his bluff, on the grounds that Gramm-Rudman’s automatic cuts would hit the Pentagon harder than any likely spending compromise with the new Administration.

Aides caution that Bush’s incoming budget director, Richard G. Darman, although determined to find a way to reinforce Bush’s pledge against higher taxes, has not yet decided whether he thinks it would be better for Bush to announce his willingness to accept Gramm-Rudman’s indiscriminate spending cutbacks early or to play a waiting game with Congress.

“Gramm-Rudman creates a whole new set of dynamics,” said a budget official who has discussed the confrontational approach with Darman. Bush “has got to be willing to work with Congress, but he also has to show that he’s not a wimp.”

Meanwhile, Bush announced Tuesday the appointment of former Republican Sen. Paul Laxalt of Nevada and former Democratic Rep. Thomas L. Ashley of Ohio, a classmate of Bush at Yale, as his representatives on a bipartisan commission charged with formulating a plan for reducing the deficit.

In making the announcement, Bush reiterated his pledge to oppose any tax increase. “I intend to hold the line on taxes,” Bush said. “There are a lot of people around saying I can’t do that.”

Bush’s appointments bring the National Economic Commission, which was established by Congress last year in the hope that it could draft a budget proposal acceptable to both Republicans and Democrats, to its full complement of 14 members. The panel’s co-chairmen are Democratic power broker Robert S. Strauss and former Transportation Secretary Drew Lewis, a Republican.

Although Bush has criticized the commission as a stalking horse for those favoring tax increases to help reduce the budget deficit, he went out of his way Tuesday to praise the high-level advisory group.

“I am looking forward to hearing from the (commission) and hearing their suggestions. I’m not looking for a battle with them, and there won’t be one,” he said.

But Bush also told a group of business leaders that he expects a tough fight next year with Democrats in Congress. “There is going to be a battle ahead,” he warned.

In preparation, congressional Republicans are already looking at budget proposals aimed at achieving Bush’s “flexible freeze,” which would hold the overall federal spending increase to the rate of inflation.

But they say that one key element of their plans would be Bush’s willingness to propose a host of user fees aimed at making recipients pay more for federal services. These could range from higher entrance fees at national parks to increased charges for boaters to support the Coast Guard.

“As long as the definition of ‘read my lips’ does not preclude user fees,” one congressional aide said, “he can make it work.”