Goodby, Gramm; Goodby, Rudman : Why the deficit-reduction law must be put on hold

Washington is ankle-deep in irony as Congress prepares to return to work next week. Not the least of the ironies is that Washington’s failure to cope with the federal deficit must force Congress to suspend indefinitely the only hope it has of getting the federal budget into balance.

The timeout means putting the Gramm-Rudman-Hollings deficit-reduction law on hold. Congress has no choice, and it should act at once.

In another irony, a sagging economy could hoist the federal deficit for next year above the record high gap between income and expenses in 1985 that prodded Congress to enact the deficit-reduction law in the first place.

And with American troops and heavy weapons still pouring into the Middle East, the automatic bite that Gramm-Rudman would take out of the budget would force the Pentagon to muster out half of its uniformed troops starting Oct. 1.

This will not happen because President Bush plans to exercise his right under the bill to shield personnel from Gramm-Rudman’s jaws. But it still provides an unnerving measure of the severity of a rising national debt that could and should have been dealt with five years ago with the kind of budget cuts and tax increases that are out of the question for now.

While economists argue whether the United States is in a true recession, the people who really count--American consumers--seem to have made up their minds. A recent survey found only a minority believing that good times lie ahead. Because the economic health of recent years has been largely due to jaunty consumer spending, a loss of public confidence in the economy is hardly good news.

Corporations are about as deeply in debt as consumers and the federal government. Some analysts think the economy is in better balance than it was when the last recession began in 1980, but the country has never gone into or even near recession with a built-in budget deficit the size of the one Washington has accumulated.

The White House budget in January forecast a deficit of about $100 billion that would have required cuts or tax increases--or some combination of both--to get the deficit down to the $64-billion limit written into the Gramm-Rudman act for fiscal 1991. By early summer, falling revenues and rising costs, including an additional $20 billion in interest on the national debt, forced the White House to raise the estimate to $170 billion. When the cost of protecting depositors from losing their money when a savings and loan fails is added, the deficit soars to $231 billion.

The concept of Gramm-Rudman entailed automatic cuts so deep and blind that Congress would rise above its inclination to stall for time and do whatever was necessary to escape the Gramm-Rudman ax.

It never did work as it was supposed to, and this year events conspired to prevent it from working at all. So, unless Congress turns off the automatic budget-cutting machine, it will wipe out nearly 40% of the money for domestic programs.

Social Security and some other entitlement programs are exempted, but the defense budget would be slashed by 25%, even after the President used his authority to protect against deep cuts in personnel.

Taking the deficit from $170 billion down to the target of $64 billion was not in the cards even before the Middle East crisis. But, political pushing and shoving aside, both Bush and leaders of the House and Senate seemed prepared to make the most serious effort in a decade to slow the growth of the national debt, now resting uncomfortably at some $3 trillion.

They hoped then for tax increases and budget cuts totaling $50 billion. Now they will be lucky to get half that. Can they work up the nerve to start over when the crisis ends? They have no choice: Left untended, the problem will just get worse.