Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, July 17, 1990 TAG: 9007170187
SECTION: NATIONAL/INTERNATIONAL PAGE: A1 EDITION: METRO
SOURCE: Los Angeles Times
DATELINE: WASHINGTON LENGTH: Long
White House budget director Richard Darman, preaching that the end is near, said that the roughly $100 billion in automatic Gramm-Rudman cuts scheduled to go into effect in October would eliminate about half the nation's military forces, produce chaos in the air traffic control system, prevent any new hazardous waste cleanups and wipe out federal grants to 2.2 million college students.
"This is not some far-fetched theoretical construct," Darman told reporters. "If the summit negotiations fail. . .these effects of sequester are exactly what we will face in the fall."
The dire warning came as the White House released its official deficit forecast for the fiscal year that begins Oct. 1. The $169 billion in projected red ink is $9 billion higher than its unofficial forecast last month and far in excess of the $64 billion deficit target called for under the Gramm-Rudman budget law.
And the new deficit forecast - based on what would occur if Congress makes no changes in current spending and tax policies - does not include the cost of cleaning up the savings-and-loan mess, which would swell total borrowing for fiscal 1991 to $231 billion.
Administration officials and congressional leaders privately agreed in May, shortly after beginning a round of budget "summit" negotiations that is still under way, that it would be impossible for them to reach next year's $64 billion deficit goal. Instead, they hope to produce a major package of spending cuts and tax increases for next year of roughly $50 billion.
The White House is engaged in a risky game of political chicken with rebellious lawmakers from both parties. Many House Republicans have vowed to oppose any budget deal that includes a tax increase, while some Democrats want to call the White House's bluff by allowing the automatic cuts to go into effect for at least a short time.
To forestall such moves, the administration, with the support of key Democratic and Republican budget negotiators, is stepping up its campaign to force action before the Oct. 15 Gramm-Rudman deadline by detailing in advance how devastating the automatic cuts would be.
"These new numbers should hit the White House, the Congress and the [budget] summit like a fire alarm in the middle of the night," said Rep. Leon Panetta, D-Calif., chairman of the House Budget Committee. "Now is the time of reckoning."
Administration officials tried to impress on House Republicans in particular that the only choice is either to accept a budget deal including higher taxes or face the consequences of destroying hundreds of popular and essential federal programs. Until Congress approves a credible deficit-reduction package, Secretary of the Treasury Nicholas F. Brady said, the White House will not flinch from carrying out the automatic cuts.
"The law is the law," he said. "We're going to obey it."
If the administration is required to impose a $100 billion spending cutback, the Gramm-Rudman meat ax would carve 25 percent from most defense operations and slice 38 percent from a wide variety of domestic spending programs. Government benefits to the elderly and the poor, such as Social Security, Medicare and food stamps, would be largely immune from the cuts.
The automatic cuts, Bush said in a statement, "will affect almost all that the federal government touches. . .. It is, therefore, all the more important that the budget summit reach agreement promptly and that the Congress act responsibly to bring the deficit down."
Congressional Democrats, however, continued to blame Bush for failing to speak out publicly on the budget dilemma.
"Only the president can persuade the country that we have a problem," House Majority Leader Richard Gephardt, D-Mo., said.
Expressing skepticism about the chances of reaching a deficit agreement in the absence of a crisis, Gephardt said he worried that imposing the automatic cuts might be the only action that would persuade reluctant lawmakers to ratify such a deal.
"It would be a true reality test," he said. "Maybe that is the only way we can demonstrate how serious the problem is."
Sen. Pete V. Domenici of New Mexico, the leading Republican on the Budget Committee, argued that budget negotiators must ultimately reach a compromise because the alternative to widespread automatic cuts would produce "nothing short of pandemonium."
The latest deficit figures, which now put the White House in line with earlier projections by the non-partisan Congressional Budget Office, far exceed Bush's own projection just six months ago of a $100.5 billion gap between spending and revenues.
By relying earlier on more optimistic assumptions and by dismissing the S&L cleanup costs, the White House was able - at least on paper - to reach the Gramm-Rudman target with only about $38 billion in varied spending cuts and relatively minor tax increases.
But a string of errors in the White House forecast - caused by the economy failing to live up to the administration's own rosy expectations, a drastic falloff in the growth of tax revenues and the swelling costs of the S&L bailout - forced the administration to admit its huge miscalculation and seek a budget compromise with Congress.
The bad news began to hit the federal budget as the economy slowed late in 1989. After several years in which the federal deficit stayed level at roughly $150 billion, the White House now expects federal borrowing, including S&L costs, to swell to $218.5 billion this fiscal year. Even excluding S&L costs, this fiscal year's deficit is likely to exceed $161 billion, far above the current $100 billion Gramm-Rudman target.
by CNB