Budget Choices: Cut a Deal or Dig in Heels

Behind the partisan smoke and rhetorical fog enveloping the budget crisis that has shut down much of the federal government, the outlines of potential end games are beginning to emerge.

* Scenario 1: The Grand Compromise.

This script would end the shutdown, avert a potential debt default and send federal employees back to work by producing a negotiated settlement between President Clinton and congressional Republicans. The deal would purport to lead to a balanced budget and make many--but not all--of the renovations Republicans are seeking in the house of government. But getting there would require both Clinton and the Republicans to make potentially painful concessions, which they have so far seemed unwilling to make.

* Scenario 2: The Big Fizzle.

In this alternative ending, efforts to reach a compromise on balancing the budget eventually would collapse, but the federal government would manage to hobble along. Government workers and agencies would be allowed to go back to work on a case-by-case basis, but some would stay home indefinitely. The larger dispute about the federal government’s budget would be pushed into next year--maybe all the way to the November presidential election--and the political repercussions could be enormous.

At this point, only a few days into a budget standoff with no exact precedent, no one knows for sure which way things will go. “I am completely at a loss,” confessed one Clinton Administration official who asked not to be named. “We’re in uncharted waters here.”

But many analysts say the heightened partisan tensions and increasingly personal barbs being traded over the government shutdown is making it much harder--if not impossible--for Clinton and the Republicans to make the compromises needed to write a balanced-budget plan into law.

“By polarizing things too sharply, you make it impossible for the warring parties to become compromising when compromise becomes necessary,” said Martha Phillips, executive director of the Concord Coalition, a nonpartisan anti-deficit group in Washington. “How do we get from this current childish, contrived situation into serious, good-faith negotiations?”

Stopgap Funding Ends

The situation Phillips decries is the impasse between Congress and the White House over a short-term spending bill, known as a continuing resolution, needed to run the government. Stopgap funding is required because most of the 13 appropriations bills needed to finance the government after the new fiscal year began Oct. 1 have not been enacted. The government has been shut down since Monday at midnight, when a previous stopgap measure expired. Clinton vetoed an extension of spending authority because it included a Medicare premium increase and other provisions that he said he could not accept.

Republicans have refused to pass another continuing resolution until Clinton commits himself to their seven-year timeline for balancing the budget. Moreover, they want him to accept their conservative economic forecasts for calculating the deficit. Clinton so far has refused to commit to seven years, and has insisted on using his Administration’s more optimistic economic assumptions, which would require less severe budget cuts.

If the time-tested Washington rules of negotiation were followed, there would be an obvious way to break the logjam: Fudge the wording and cook the books. Republicans and Clinton could work out a more vaguely worded, seven-year commitment. Budget writers could bring the two sides closer together by juggling the economic projections.

Such a compromise is still possible. Clinton has, after all, suggested in the past that he could accept a seven-year timeline. Budget analysts from Congress and the White House already are exploring a compromise on the issue of which economic assumptions to use--a seemingly technical matter, but one that could give negotiators a lot more money to buy their way out of the impasse. For example, a small adjustment in projections on health care inflation could mean that tens of billions of dollars less would have to be cut from Medicare and Medicaid, two of the biggest bones of contention between Congress and the White House.

Pride and Ambition

But even those small-bore compromises are not coming easily in a budget battle being fought largely by some of the proudest, most ambitious men in Washington--House Speaker Newt Gingrich (R-Ga.); Senate Majority Leader and presidential hopeful Bob Dole (R-Kan.); and the man Dole wants to replace, Clinton.

In the absence of an agreement on the short-term funding issue, Republicans are trying to legislate their way out of the shutdown by passing as many of the 13 annual appropriations bills as they can, reopening the government agency by agency. That strategy has, without fanfare, allowed the government to resume operations in areas that are not at the core of the budget dispute between Clinton and the White House.

For example, employees of the Transportation Department were sent back to work this week when Congress passed, and Clinton signed, a bill that pays their salaries for the next year. Treasury Department and Capitol Hill staffers may soon follow.

It is less clear when the Pentagon, the Education Department and the Department of Health and Human Services will be back in business; those agencies are funded by bills that Clinton has threatened to veto. That could create, at least for a while, a patchwork federal government in which Treasury Department tax analysts go back to work, but Pentagon investigators do not.

Unless another continuing resolution is passed to turn the lights back on throughout the federal government, it seems increasingly likely that the short-term funding issues will be resolved only when Congress and the White House begin to address their broader budget disagreements.

Reconciliation Bill

That new stage of the budget drama will begin after Congress finishes work--Republicans hope by today--on the budget reconciliation bill. The gargantuan measure embodies most of the GOP’s plans to curb the growth of Medicare, transform the structure of Medicaid, cut taxes and make scores of other budget-cutting changes throughout government.

This reconciliation bill is the real battleground for the war between the parties, the culmination of the last 10 months of Republican control of Congress. But it has been almost overshadowed by the partisan byplay over the government shutdown.

The bill is destined for a presidential veto, after which lawmakers assume the real negotiations between Republicans and the President will begin to see if a compromise can be drafted. Until recently, many analysts and lawmakers could see a clear path to compromise in post-veto negotiations. After all, Clinton and the Republicans agree on more elements than their blistering rhetoric might indicate.

“I’ve had this naive optimism,” said Sen. Joseph I. Lieberman (D-Conn.). “The President and the Republicans are both for a balanced budget by a date certain, they are both in favor of tax cuts and they both agree that some changes are needed in Medicare.”

Earlier statements from the White House suggested that Clinton’s principal objections might be met if Republicans would scale back proposed savings in Medicare, rejigger their tax cut and restore funding for education and the environment. It wouldn’t be easy, and the negotiations could continue into next year. But veterans of past budget battles say it is possible to imagine a bill that would give Republicans much of what they wanted, while giving Clinton bragging rights for having smoothed the edges of the GOP agenda.

There’s a glimmer of hope that could still happen, if only because both Clinton and the Republicans will pay a political price for coming up empty-handed. Republicans will have crawled very far out on a political limb to vote for controversial budget cuts, and have nothing to show for it. House Budget Committee Chairman John R. Kasich (R-Ohio) direly predicts that if a balanced-budget plan is not adopted this year, it may never happen.

For Clinton, a strategy of relentless intransigence runs the risk of portraying him as an agent of the status quo.

Said former Rep. Bill Frenzel (R-Minn.), once a senior member of the House Budget Committee: “In an arm-wrestle like this, there has to be a conclusion. It can’t be a no-contest thing. Both sides would take a substantial hit in the public view if they couldn’t make an agreement.”

But the prospect of the year ending without a budget compromise is looming increasingly large, especially as the tenor of the impasse becomes increasingly bitter and Clinton’s political position appears to grow stronger.

“Clinton has things going for him,” said Allan Schick, a budget expert at the Brookings Institution. “Why should he cave?”

Even if Republican leaders and Clinton reach for a compromise, it is not clear they can craft one that is certain to pass the House and Senate. Any bill moderate enough to win Clinton’s support is likely to be too moderate to pass the House, where a big, feisty class of freshman Republicans has been uncompromising in its resistance to changing the seven-year timeline or the economic assumptions of budget writers.

“You’re going to need all of these elements to put this compromise together,” said Robert Reischauer, former director of the Congressional Budget Office. “That’s a big plate of crow for the Republican freshmen to eat.”

If it proves impossible to reach an agreement that can be passed by Congress and signed by the President, the stalemate likely will become the defining issue of the 1996 campaign. Democrats increasingly seem to welcome that scenario, which would allow them to campaign as the saviors of the social safety net and the last bulwark against Republican extremism. Republicans, for their part, may actually to prefer to campaign as the frustrated agents of change rather than as the defenders of a painful budget-balancing plan.

In the end, Schick argues, both sides will have to ask themselves a threshold political question: “Are you better off with a bill or an issue?”