The Three-Ring Circus

Story number one is a tale of political posturing. The administration split between the deficit reducers, led by OMB Director David Stockman and CEA Chairman Martin Feldstein, and those who would not sacrifice their policies to deficit reduction: Treasury Secretary Donald Regan on taxes and Defense Secretary Caspar Weinberger on spending. President Reagan and the White House political staff sided with Regan and Weinberger, but that left the White House with a political Hobson's choice. The administration could accept large deficits and be pilloried by the media, opposition, and some of its own allies. Or, it could propose big domestic cuts that once more would go nowhere, except to provoke a storm of general abuse about fairness as well as specific complaints from affected groups. Neither seemed a good way to begin an election year, so the administration chose neither; OMB produced a budget with a 13 percent real defense increase and small domestic cuts, then disavowed the deficit totals by calling for bipartisan negotiations. The Democrats, protesting their concern for deficits, could not refuse to negotiate. They seemed trapped between blame if no agreement emerged and losing the deficit issue if they made a deal. They wriggled free by both proclaiming the president's deficit reduction target too small and forcing the defense issue. In the name of budget control, they demanded detailed cuts from

a most reluctant Pentagon and, when the Pentagon failed to oblige, blamed the administration for the breakdown of the talks.

Stuck between the Democrats and the president, Senate Republicans could not defy Reagan directly because he was their major party symbol in the coming election. If they kicked him, they would be kicking themselves. GOP senators, therefore, cut a deal with the White House—the March 15 "Rose Garden Agreement." It passed the Senate, but the House would not go for the defense numbers. It didn't have to. If the senators compromised, they would be rejecting their president; if not, there could be no budget resolution. With no way out of that trap, the Senate stalled. Only in September did Howard Baker and Tip O'Neill agree to a defense compromise allowing final passage of the budget resolution on October 1.

A budget resolution not agreed on until October 1 does not guide subsequent action. What subsequent action? The FY85 first budget resolution looked far more like the second resolutions of the late 1970s—a summary of the year's events—than like the first resolutions of 1981 and 1982, which had led to major reconciliation bills.

The fate of that resolution was just the final act in the story of budget process collapse. The first casualty had been the historic role of the president's budget as representing administration preferences. When Reagan in his State of the Union called for negotiations on a deficit "down payment," he as much as proclaimed that his budget, which had not even been released yet, was not his policy; and its structure revealed that the administration was not proud of its handiwork. "Instead of being located at the front of the book, as is customary," Newsweek reported, "the budget totals were squirreled away 102 pages into the document. 'It's a perfectly normal budget,' admitted one administration budget official, 'assuming that you're Chinese.'"^[1]

The president's budget was quickly forgotten by all concerned. Next to go was the idea that budget resolutions provided reconciliation instructions, which then would be carried out in reconciliation bills. For you could have reconciliation only if you had already agreed on everything else—which, because defense was stalemated, was unlikely. Congress passed DEFRA, the Deficit Reduction Act of 1984 (H.R. 4170) even though there was no budget. DEFRA, in fact, was drafted in each house even before reconciliation instructions were placed in each budget resolution.

The politicians were adapting any available vehicle to the (somewhat inconsistent) twin purposes of reducing the deficit and pursuing other preferences. Republicans believed that an agreement on defense in the budget resolution would not prevent further cuts in authorization or appropriations processes. They therefore preferred to collapse everything

into one step. The Rose Garden agreement called for three-year restraint on domestic appropriations—hard to achieve because Congress would only be passing FY85 appropriations but demanded by the White House to ensure that Reagan got the domestic savings. Senate Republicans tried to solve that problem by including in DEFRA three-year "caps" on appropriations, a major change in the budgetary process. The House rejected that proposal and won in the conference.

Senate Republicans were not alone in encouraging the breakdown in budget procedures. The Reagan administration delayed its internal FY86 budget process (actual 1985) so that plans for cuts could not leak before the election. In the House, Budget Chairman Jones announced early in the year that he would hold the debt limit hostage, if necessary, "in order to force the president to put forward, with the bipartisan leaders of Congress, a deficit reduction package."^[2] Some Democrats, led by David Obey and Tony Coelho, seriously considered giving Reagan a line-item veto of appropriations for the year. "Ronald Reagan loves to talk about cutting the budget, but when it comes to specifics, he always ducks," explained Coelho. "This way, the president would have a chance to make it known where he wants to cut."^[3] But his colleagues really didn't want to find out.

In February House Republican leaders Robert Michel and Trent Lott floated a plan allowing the president to impound funds. Entitlements would be protected, 25 percent of the impoundments would have to come out of defense, and no more than 10 percent could be cut from any one program.^[4] The idea sank like a stone. In September a majority of fifty-one senators actually endorsed the line-item veto; the year ended with Senate Democrats sabotaging a debt limit increase so Republicans would have to vote for it. It is easy in hindsight to view all these events as precursors to Gramm-Rudman-Hollings, but surely they are the picture of a budget process in chaos. Legislators were groping for ways either to force action or at least to force someone else to take the blame for inaction.

That is the second story in which the process collapses and budgeting proceeds without rules. We might expect political posturing and abandoning all rules to make budgeting totally unpredictable and to prevent meaningful action; yet the "normal" detailed work of budgeting did proceed apace. Action in 1984 looked a lot like action in 1983, except that after a year the revenue committees had managed to cobble up enough "kittens and puppies"—compared to TEFRA's "cats and dogs"—to produce some extra revenue. The third story then is budgeting as the assembly of preferences about programs within a general understanding about constraints—essentially a freeze on domestic spending and the same defense buildup projected by Congress the year before.

Budgeting in 1984 was a three-ring circus. Action in all rings was continuous, sometimes overlapping. We find ourselves most interested in the center ring where budgeting proceeded without rules because that will best help us understand the show to come, the Gramm-Rudman-Hollings Greatest Show on Earth. But with any ring missing, the circus would not have been the same.

We leave the reader to pursue the analogy further: Where were the trapeze artists, the snarling tigers and lions—and where were the clowns?