Budget Balance a Low Priority

Balancing the budget is everyone's third priority, but nobody's first. Although President Reagan frequently voiced support for the goal of balancing the budget, as have nearly all members of Congress from both parties, there is reason to question their commitment to that goal. Virtually all politicians rank some spending program above deficit reduction and are unwilling to cut their favored program to achieve deficit reduction. In fact, for President Reagan, and probably most members of Congress, budgetary balance was probably at best a third priority.

When President Reagan said that he would not balance

[1] See CQ Weekly Report , April 30, 1988, pp. 1149–1152.

the budget "on the backs of taxpayers" by increasing taxes, he indicated that he ranked balancing the budget as a lower priority than maintaining low tax rates. When he argued that defense should not be cut to reduce the deficit, he stated implicitly that for him defense ranked above deficit reduction. Nearly everyone has some program or component of the budget that he or she would not reduce in order to lower the deficit—Social Security, agriculture, housing, food stamps, veterans, or whatever. Many representatives—perhaps all—regard a cut in their favorite program as worse than having a large deficit.

Moreover, nearly everyone believes that the way to balance the budget is to cut the programs that benefit constituencies other than one's own. By this means each member of Congress could probably produce a balanced or nearly balanced budget that he or she could support. Liberals might raise taxes and cut defense. Conservatives would cut various social programs. In arguing for the adoption of a controversial reconciliation bill in 1987, Representative William Gray (D-Pa.), chairman of the House Budget Committee, addressed this issue: "There are, Mr. Speaker, 535 members of Congress; and I might add, there are probably 535 deficit reduction plans. However, my friends and colleagues, we can only implement one."^[2] The same can be said as well of budget resolutions. But neither liberals nor conservatives, nor any other homogeneous faction in Congress have a clear majority; only by compromising may progress against the deficit be made. According to Gray, "There is always some pain, and none of us will be completely satisfied, but I urge you to remember tonight when you vote on

[2] Cong. Rec., daily edition (Dec. 21, 1987), p. H11967.

this reconciliation package that it is the one package that can be implemented, signed into law, and receive bipartisan support."^[3] Cutting the budget requires that different factions accept cuts in their favorite programs in exchange for deficit reduction. Throughout the 1980s the willingness to make such exchanges has been severely limited.

The only cost of not compromising is that the deficit continues to be large, but that is something all parties seem able to live with. Because deficits are only somewhat unpopular with the public but program cuts are extremely unpopular with beneficiaries, the prudent legislator prefers to tolerate large deficits than to impose costs on vocal constituencies.

As deficit reduction proposals make their way through the legislative process—from committee, to the floor, to the conference, to the president—controversial provisions are deleted in an effort to garner more votes. The tasks of both assembling a majority in the House or the Senate behind a resolution and obtaining the agreement of the other chamber and the president thus mean a gradual scaling down of the magnitude of deficit reduction. Deficit reduction proposals that begin very ambitiously in committee are trimmed at each stage until, when they finally pass, they are significantly diminished. Because members care more about protecting programs than about reducing the deficit, the price of obtaining their support is deleting some reduction or another. Thus, by the time each member of the majority needed to pass the bill has extracted his or her price, the package is unimpressive.

In 1981 comprehensiveness in budgeting aided efforts

[3] Ibid.

to reduce spending, but in other years it has not. Fragmentation was widely blamed for congressional inability to control spending prior to the Budget Act, yet various observers have noted that comprehensiveness does not necessarily hold spending down.^[4] When members of Congress place spending or deficit reduction as a top priority and are willing to reduce their own favorite programs to achieve such reductions (provided others will do likewise), then comprehensiveness will assist by allowing members to ensure that the burden of reductions will be borne more or less equally. But if an individual is primarily concerned to protect a particular program from cuts, then packaging cuts together will make him less rather than more likely to support reductions. Suppose a representative supports defense reductions but cannot under any circumstance support the limitation of Social Security COLAS. Although he can vote for a separate bill enacting defense cuts, he must vote against a bill that packages defense cuts with curtailing the COLAS.

Nearly endless wrangling over the budget in 1985 revealed clearly that, despite constant complaints about the deficit, the commitment to deficit reduction was minimal. For the White House, protecting the defense budget and low tax rates obviously ranked above deficit reduction; for the Democrats in the House, protecting domestic spending was a higher priority than deficit reduction.

[4] Allen Schick states that "an omnibus process can lead to higher spending by expanding the scope of interests that have to be satisfied." See Schick, The Whole and the Parts: Piecemeal and Integrated Approaches to Congressional Budgeting, Committee Print, House Budget Committee (USGPO, February 1987), p. 57. John Ferejohn and Keith Krehbiel also argue that under certain circumstances the use of comprehensive budgeting leads to higher rather than lower spending. "The Budget Process and the Size of the Budget," American Journal of Political Science 31 (May 1987): 296–320.

Republican leaders in the Senate seemed truly committed to deficit reduction; that is, they were willing to accept defense reductions and some tax increases to reduce the deficit, if the House would support domestic cuts. Ultimately, the White House sold out the Senate by reaching a separate agreement with the House to avoid both defense and domestic cuts, and tax increases. It was, in essence, an agreement to protect all the beloved programs by keeping the deficit high.

Having lost so badly in the presidential election in 1984, Democrats permitted the Republican Senate to take the initiative in passing a budget resolution in 1985. Although the Senate remained under Republican control after the 1984 election, passing a resolution promised difficulty because twenty-two Republican senators first elected in 1980 would be up for reelection in 1986 and would consequently hesitate to back a resolution that called for big cuts in popular programs. The SBC Republicans met frequently in caucus in an effort to put together a palatable package, but they mostly succeeded in writing a resolution that even its authors were reluctant to embrace. This resolution, called a "turkey" by one supporter, would require a freeze on domestic spending programs, eliminate any Social Security COLAs for the year, and provide for no real growth in defense. These were controversial proposals, bound to anger both the president and other conservatives for cutting defense spending and the liberals for cutting Social Security.^[5]

The proposal's authors evidently hoped that liberals and conservatives would be able to support a proposal that gored both liberal and conservative oxen. Instead

[5] CQ Weekly Report , March 16, 1985, pp. 475–478.

both liberals and conservatives, including the president, denounced the plan. A series of talks with the White House ensued, resulting in an agreement between the White House and Senate Republicans on a revised budget proposal restoring part of the COLA, providing for 3 percent real growth in defense, and calling for the outright elimination of a number of domestic programs. In late April, majority leader Bob Dole brought this package to the floor where it collapsed under the pressure of amendments. Republicans joined Democrats to pass amendments restoring full Social Security COLAs, cutting defense, and restoring funds to Medicare and Medicaid. At the end of what must have been a very frustrating day, Dole assured reporters that the damage was not permanent. "We'll put it all back together, like Humpty-Dumpty."^[6] However, unlike all the king's horses and all the king's men, Dole could put it together again. True to his word, a week and a half later he brought the budget resolution to the floor again and offered a substitute amendment to the previously amended document. The substitute was very close to the original SBC budget proposal, calling for no Social Security COLA, a defense freeze, and numerous program terminations. Dole lobbied hard to get nervous Republicans to stand behind the substitute, which they did with few exceptions. Senator Pete Wilson (R-Calif.), recovering from surgery, was carried on a stretcher into the Senate chamber to cast his vote, and Vice President George Bush broke a 49-49 tie.^[7] For Senate Republicans, on this vote at least deficit reduction emerged as a top priority.

Under firm Democratic control, the House had no trouble passing a budget resolution. Their resolution

[6] CQ Weekly Report, May 4, 1985, p. 817.

[7] CQ Weekly Report, May 11, 1985, pp. 871–874.

passed shortly after the Senate adoption of a resolution and matched the magnitude of deficit reduction in the Senate proposal but by markedly different means: the House resolution allowed a full Social Security COLA and cut defense more deeply than the Senate resolution.

The conference committee quickly bogged down when neither side would agree to significant compromises. The Democrats intended to use Social Security as a campaign issue in the 1986 election so the House conferees naturally opposed any reduction in the COLA which would erase an important distinction between the two parties and sacrifice a potent electoral issue. Senate Republicans would give no ground on defense, particularly if the House would give none on the COLA issue. After a month of fruitless negotiations, the conference broke up on June 25.

Two days later, amidst dire prophecies about the possible demise of the entire budget process, the Senate conferees countered with a new proposal, one that put taxes on the table for the first time that year. House conferees immediately welcomed this gesture as a positive sign. The Senate conferees, who acted on their own initiative without the blessings of either the president or the Senate leadership, evidently hoped that if the Senate showed a willingness to raise taxes then the House would agree to the COLA cuts.

Whatever promise the new Senate proposal might have held for breaking the deadlock was quickly destroyed by President Reagan, who was evidently disturbed by the prospect of a tax increase and a defense cut. At a White House cocktail reception for the House leadership, President Reagan and Speaker O'Neill reached a separate agreement on a budget "framework."

In a remarkable display of concerted indifference toward the deficit, Reagan and O'Neill agreed to (1) forego tax increases, (2) accept the higher Senate defense spending level, and (3) not cut the Social Security COLA. This agreement appears to have resulted from a mutual recognition that the pursuit of deficit reduction threatened programs they valued more, so they agreed to protect their favorite programs and eschew deficit reduction. Representative Jack Kemp (R-N.Y.), the presidential aspirant who untiringly supported low tax rates, reportedly convinced the administration to accept the House position on Social Security in order to avoid tax increases. In addition, sixty-seven House Republicans urged Senate Republicans to give up their insistence on COLA cuts; they did not want their party associated in the minds of voters with Social Security cuts. One may question the political sagacity of the Senate Republicans, who had voted in favor of Social Security cuts and whose conferees had raised the possibility of tax increases, but scarcely their commitment to deficit reduction.

The Reagan-O'Neill framework produced a major defeat for the cause of deficit reduction and a personal embarrassment for Bob Dole, who had led the fight against the deficit and urged reluctant Republicans to vote for his resolution. They had done so, at risk to their political careers, and now their president had betrayed them by "caving in on the COLA issue."^[8] The deal provoked anger and frustration among Republicans in the Senate. Dole accused Reagan of "surrendering to the deficit." "If the President can't support us, he ought to keep his mouth

[8] CQ Weekly Report, July 13, 1985, p. 1357. These are Bob Michel's words.

shut," opined Charles Grassley (R-Iowa), who was up for reelection in 1986 and who had voted for the COLA cuts. "That [the framework] was not an agreement of the 50 guys who jumped off a cliff over here," said Alan Simpson (R-Wyo.), in reference to those who voted for the COLA cut. Some Democrats were disturbed by the behavior of their leaders. Representative Mike Lowry (D-Wash.) complained that "O'Neill and Wright were so stuck on COLA's, they would give away the world for COLA's."^[9]

With the Speaker of the House totally opposed to COLA cuts for Social Security and the president utterly against tax increases, could there be any hope for deficit reductions? Was there nothing to do other than wait for the election of a new president or a new Congress? At this point, when all other opportunities seemed to have been exhausted, Gramm-Rudman appeared on the scene.