Congress, Officials Seek Budget-Plan Loopholes : Deficit: New framework is designed to put ceiling on spending. But some try to tie their projects to Gulf War.

This year’s budget fight was supposed to be a “battle of ideas” in which, for the first time, Congress and the White House would have to pinpoint the government’s priorities and make tough choices.

Budget Director Richard G. Darman said last week that a “new dynamic” had been created by the spending limits imposed in a five-year plan to reduce the deficit, and Congress thus would find it impossible to create new projects without slashing or killing others.

Only a few days have passed since Darman disclosed the Bush Administration’s $1.45-trillion spending plan for fiscal 1992. But, already, it has become clear that Darman’s air war over ideas is much more likely to become a grubby ground campaign in which both Congress and the Administration probe for loopholes in the new budget framework. This is the first budget to be submitted to Congress under the new deficit-reduction program.

Congressional budget experts say there are already signs that many in Congress, rather than engage in a debate over the merits of their pet programs, seem determined to find ways to finesse the new budget rules, just as they did under the old Gramm-Rudman framework.

“This is a new system, so it will take time for people to learn how to cut corners,” said one staff member on the Senate Appropriations Committee. “But cutting corners is what people are good at.”

So far, the war in the Persian Gulf is offering the biggest loophole to lawmakers eager to escape the new budget discipline. Under last fall’s accord, any expenditures related to national emergencies are exempt from the spending limits imposed on the rest of the budget. Both Operation Desert Shield and Operation Desert Storm fall into that category. Funding for the savings and loan bailout also has been excluded from the accord.

As a result, both the Senate and the House are being flooded with new spending bills claiming to be war-related.

Rep. Leon E. Panetta (D-Carmel Valley), chairman of the House Budget Committee, complained last week that a dozen or more bills seeking to expand veterans’ benefits have been submitted since Congress came back into session in January. To circumvent the spending limits of the budget agreement, virtually all of them claim to be related to Operation Desert Storm.

The bills would provide a range of costly new GI benefits, including extended unemployment pay and child-care support for military personnel assigned to the Persian Gulf.

Panetta, worried that the budget agreement could be rendered irrelevant if such claims continue to proliferate, sent a letter to all House members last week reminding them of the new spending limits and warning against capricious attempts to break the agreement with requests for emergency funding exemptions.

Meanwhile, Sen. Robert C. Byrd (D-W.Va.), chairman of the Senate Appropriations Committee, said on the Senate floor last week that there are strict limits on how legislators can seek and qualify for emergency funding exemptions under the budget agreement.

“A lot of the (House) members still have not come face to face with the budget agreement,” Panetta said. “Everybody is still putting in the same old bills they always put in, without recognizing that they have to live within the spending caps.”

In the Senate, meanwhile, staff members of the Budget Committee have become so fearful of widespread cheating on the spending limits that they are creating new computer programs to monitor and analyze the budgetary impact of each new bill.

But the Bush Administration may try a few tricks of its own to get around the caps. One Senate staff member complained that some civilian federal agencies are already attempting to tap into the extra funding earmarked for Operation Desert Storm by arguing that they have provided support for the Pentagon.

“I think we will see people in both the Administration and Congress try to use Desert Storm emergency funding for other uses,” the Senate official said.

It wasn’t supposed to be so easy for Washington to play games with the budget this time. After years of hurling charges and countercharges at each other over violations of the Gramm-Rudman budget-cutting targets, Congress and the White House effectively junked Gramm-Rudman last fall to create a more honest framework that they hoped would provide fewer incentives for cheating.

Gramm-Rudman enticed both the White House and Congress to cheat because it called for automatic budget cuts if the deficit reached certain predetermined levels. But, because those deficit targets were heavily influenced by economic forecasts, the Administration always had an incentive to make unrealistic economic predictions, thus dooming the budget to ever greater deficits.

The new five-year, $490-billion deficit-reduction framework ignores the size of the deficit. Instead, it watches spending, which is much easier to track. The agreement establishes ceilings on so-called discretionary spending in each of the three main segments of the budget--domestic, defense and international programs.

Funds may not be shifted from one area to pay for programs in another segment, and taxes may not be raised to create new programs in any of them. As a result, within the categories, any increase in the funding of one program must be offset by a reduction in another.

“The discretionary programs are going to be on the rack,” said Robert Reischauer, director of the Congressional Budget Office.

For the broad mandatory programs outside the capped discretionary spending--the “entitlements” such as Medicare and Social Security--spending must be on a pay-as-you-go basis so that any expansion of benefits does not increase the deficit.

With little room to maneuver within the budget framework, the Bush Administration’s 1992 budget proposal was greeted with a relatively modest level of criticism.

“This is the most honest budget we’ve had in years,” observed Rudolph Penner, a former director of the Congressional Budget Office and now a budget analyst at the Urban Institute in Washington.

Although many congressional Democrats opposed the White House effort to resurrect the controversial capital gains tax cut and complained about cuts in Medicare, many Democrats actually praised the Administration for offering a realistic budget package that seemed to be free of smoke and mirrors.

Congressional staff members said that the criticism was mild because the new budget framework is narrowing the debate. “The criticism is toned down this year,” a spokesman for House Majority Leader Richard A. Gephardt (D-Mo.) acknowledged.

But even Panetta knows that, once the new agreement starts to bite into existing programs, the pressure will build in Congress to change the deficit-reduction framework. And everyone in Congress knows that the five-year accord’s strongest medicine will come in its final two years, fiscal 1994 and 1995, which leaves plenty of time for alterations.