Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, May 15, 1990 TAG: 9005150657
SECTION: NATIONAL/INTERNATIONAL PAGE: A/1 EDITION: EVENING
SOURCE: TOM REDBURN LOS ANGELES TIMES
DATELINE: WASHINGTON LENGTH: Medium
The driving force behind the budget summit negotiations that start today between the Bush administration and congressional leaders is the fear of political bloodletting this fall if automatic spending cuts are not prevented from going into effect.
Unless politicians from both parties can agree on a plan to curb the deficit by a lesser amount, the Gramm-Rudman deficit law would require eliminating as much as $100 billion from a host of popular domestic and defense programs. For those federal activities unprotected from the Gramm-Rudman ax, the cuts could hack 20 percent to 45 percent from hundreds of crucial spending programs.
"We could put air traffic controllers on a four-day week. So much for public safety," House Ways and Means Committee Chairman Dan Rostenkowski, D-Ill., warned in a speech last week. "Spending on anti-drug activity would be cut by about $2 billion. . . . Now that'll send a clear message to the criminal class."
At the White House, the most horrible scenario would be an economic recession next year that might threaten President Bush's 1992 re-election prospects.
Administration officials argue that it is crucial to wrap together a more limited pack- age with perhaps a total of $50 billion in spending cuts and tax increases to avoid the political backlash and the harsh economic impact from slashing $100 billion. They also hope a budget agreement would prod the Federal Reserve into lowering interest rates to stimulate economic growth.
As a result, all parties to the budget summit have a stake in burying Gramm-Rudman this year.
"Across-the-board spending cuts of the magnitude now contemplated are too big for [either Congress or] President Bush to swallow," said Thomas Mann, director of political studies at the Brookings Institution, a Washington think tank.
The budget summit, he says, is designed to produce "some kind of political cover for changing the rules of the game . . . because everybody needs a release from the mandated targets of Gramm-Rudman."
The budget negotiations, which are expected to stretch out for at least several weeks if not well through the summer, get under way against a backdrop of mutual suspicion.
Senate Majority Leader George Mitchell, D-Maine, told reporters Monday that "there remains a high level of resentment and skepticism" over Bush's motives after White House chief of staff John Sununu's remarks last week convinced many Democrats that they could be walking into a Republican trap designed to blame them for higher taxes.
"A great many Democrats expressed the view to me that the president's campaign pledge was phony," Mitchell added, "and now that it will have to be broken, they [administration officials] are looking for political cover."
Meanwhile, the White House strategy is to avoid a backlash from the Republican right and find a way to placate middle-class taxpayers for betraying Bush's well-known "Read-my-lips:-No-new-taxes" stance.
With such a highly charged political atmosphere, it is understandable why both Democrats and Republicans want to conduct the nasty business of budget negotiations behind closed doors. Their hope, as in Agatha Christie's "Murder on the Orient Express," is to produce an overall deficit agreement in which they all participate without leaving any evidence behind that might convict anyone of a specific crime.
"The tricky part is getting all the parties to get from where they are right at the moment to where they might agree," White House budget director Richard Darman said in a television interview Sunday, "without getting themselves in such [an] argument that the thing falls apart."
Gramm-Rudman was designed to create the threat of a crisis to force the White House and Congress to reach a deficit compromise. It may finally be succeeding in that goal this year. But it was never contemplated that the law, which aimed at a balanced budget by gradually lowering the deficit ceiling each year, would demand such Draconian budget cuts.
In January, the White House relied on patently optimistic economic assumptions to produce a spending blueprint claiming the $64 billion deficit target for the 1991 fiscal year could be reached with $36.5 billion in spending cuts and revenue increases.
But several things have happened since then to swell the deficit for the fiscal year that begins Oct. 1. Higher interest rates are driving up the cost of federal borrowing, while weaker economic growth has slowed the flow of tax revenues into the government's coffers. Those two factors are expected to add at least $20 billion to the deficit.
What is worse, the need to borrow perhaps another $50 billion next year to finance the savings-and-loan cleanup could push the budget deficit as much as $100 billion over the Gramm-Rudman ceiling.
by CNB