Life Without a Budget

Once DEFRA was passed, one might have expected a budget resolution to follow. After all, raising taxes and cutting medicare should have been the hard part. On June 27 Senate conferees proposed that the resolution set a range for the national defense function, with the House's $285.7 billion as the low point and the Senate's $299 billion in budget authority as the high. Senators could then tell the president that the budget resolution accepted the Rose Garden level of defense expenditure and that the previous year's "reserve fund" provided a precedent for flexible totals. House Democrats rejected the Senate offer. Instead they offered a 5 percent real defense increase, which the Senate refused. Chairman Jones then called on his colleagues to reject a new increase in the debt limit; the House did so on June 28 by a large margin. The senators called Jones's bluff by refusing to meet with House Budget conferees, so Congress passed another short-term extension. Congress departed for most of July, the president signed DEFRA and the debt increase during its absence, and the budget resolution languished. Congress had acted on the deficit, not the budget. Instead of the deficit being a residual of the budget, the budget had become an afterthought to the deficit.

Both houses had already provided for functioning without a budget resolution. DEFRA included "sense-of-the-House" and "sense-of-the-Senate" language that established their respective fiscal plans as targets for appropriations action. When the House adjourned at the end of June, it had passed seven bills; only the perennial headaches—Labor-HHS-Education, defense, and foreign aid—remained to be reported by House Appropriations. The Senate passed four appropriations in June; when Congress recessed, three bills had already been enrolled, gone through conference, and sent to the president for his signature.

The appropriations committees could do quite well without a final budget. Appropriations committees need to know three things: what will pass their own chamber, what the other chamber can live with, and what the president won't veto. Each chamber's budget resolutions and experience tell legislators more about sentiment than they could learn from a conference agreement. Each chamber judges the other by the actions of its conferees and its votes on the appropriations bill itself. Each house

judges the president by what he or his OMB director says about each bill. The administration had announced that the Rose Garden's 2 percent nominal increase would be the standard on domestic spending. Appropriations members knew that, if they could live with that restriction, their bills would be signed. Following that guideline, Energy and Water and HUD-Independent Agencies were signed in June.

When Congress returned after the Democratic Convention, however, the waters got choppy, and the sailing became more difficult. Members of Congress wanted to increase some domestic spending—for example, Labor-HHS-Education—by more than 2 percent. The administration had to worry that if it approved 2 percent increases in places where it had proposed major cuts (like Interior and Commerce), Congress would hold back the more popular bills with bigger increases until the end. In other words, an overall 2 percent increase assumes some less and some more; if the most likely "more" is saved until the end and if everything else is judged separately by the 2 percent standard, then all the "less" will hit the mean, and everything else will exceed it.

While the White House grew more critical of individual bills, the defense hang-up spread from the budget resolution to the defense authorization bill to the appropriations. The actions and comments of Senator Stevens on August 3 neatly summarized Senate Republicans' dilemma. With the defense authorization bill deadlocked in conference, Majority Whip Stevens convened his defense appropriations subcommittee to mark up the DOD appropriation. His subcommittee approved a bill that conformed to the Rose Garden targets. Having done that, however, Stevens admitted that "whether we like it or not, we'll get 5 percent…. We'll be lucky to get that." As a leader Stevens was supporting his administration, yet neither he nor anyone else expected to win. The White House insisted that it had no interest in compromise. Stevens had told the truth, and everyone knew it; but the majority leader refused to give his president the bad news.^[67]

Chiles feared that the Republicans' maneuvering could kill the budget process. When the Agriculture appropriation reached the Senate floor on August 1, the Florida senator, who had allowed five previous appropriations bills to receive a waiver of the requirement that the First Resolution be passed first, objected. "What we are doing," he declared, "is trying to wipe out the mandate of the Budget Act and take us back to the old days when we went ahead, passed appropriations bills, and then just added up the total." Right. Then Chiles launched into a filibuster. On August 8 the Senate invoked cloture on Chiles, 68 to 30, proceeding to pass its version of the agriculture appropriation on August 10. But Chiles announced that he would object to every subsequent appropriations bill until the budget impasse was resolved, thereby presenting the

threat of a totally clogged Senate schedule. He suggested that all the defense figures be settled at once in a summit among the party leaders, budget and armed services committee heads, and defense appropriations subcommittee leaders.

A Senate leadership aide commented that by holding up appropriations, Chiles actually helped Howard Baker. The majority leader could tell the White House that if he did not bargain, the Senate would become unmanageable. Nevertheless, negotiations dragged on past the Republican convention and into mid-September.^[68] Finally, on September 20, Senator Baker and Speaker O'Neill announced their agreement. They allowed a defense authorization total of $297 billion but limited the appropriation to $292.9 billion—the 5 percent increase that everybody had expected all along.

Reagan and his defense advisers may have calculated that they would lose nothing by delaying compromise so long. Yet Howard Baker was retiring from the Senate, and Pete Domenici was getting tired of fighting battles for the White House, especially since he and Chiles were natural allies on both substantive and institutional grounds. The president and his staff were using up their personal credit with Senate allies. That may have something to do with the fact that there were to be no defense increases in either the next round or the round after that. On September 20, 1984, though no one knew it at the time, the defense budget had reached a plateau. In real dollars, it was about to begin sloping downward.

Such is hindsight. At the time, Congress was rushing to complete its work and go home to campaign. Legislators and the president wanted to show how much they cared about reducing the deficit. They also wanted to do good things for their constituents. Once again, the end of the session produced a chaotic clash over appropriations.

Commerce, Justice, State, and Judiciary went through fairly early. The programs that Stockman and Reagan disliked received about one-third more than requested; law enforcement and foreign policy ("national interest") programs got about 3 percent less than the president asked for. Total action averaged out to small (2 to 6 percent) real increases in the major accounts. Failing to induce Hatfield to enforce its priorities, the administration chose to sign rather than risk a political veto battle.

Other less fortunate bills were bogged down by controversies somewhat tangential to questions of government finance: abortion, on Treasury and Labor-HHS-Education; deterrence strategy (the MX), on the Department of Defense; orange marketing orders, on Agriculture; a turf fight between the Public Works Committee and Appropriations, on Transportation. The most acrimonious policy dispute involved Central

America. The El Salvador issue was settled in August and September. Both the election of Christian Democrat José Napoleon Duarte as president of El Salvador and Duarte's own lobbying convinced skeptical Democrats to support aid. They did not want to sabotage a leader whose professed policies were essentially their own. The Nicaraguan Contras, however, had no Duarte, and they did not get into the House CR.

Congress was also confounded by the now familiar question of which authorizations would be attached to the CR. When the Rules Committee, responding to a veto threat, stripped a series of authorizations from the CR, a coalition of House members of all sorts, demanding a chance to put more baggage on the CR freight, beat the rule, 225 to 168. The next day, Rules reversed itself and allowed eleven amendments, including an $18 billion water projects authorization, start-up water projects funding, and the foreign aid authorization. On September 25 the House added the water projects and foreign aid authorizations. It also inserted an omnibus anticrime bill that had been passed by the Senate; members hoped that by so doing they would make a veto less likely.^[69] The administration reiterated its veto threat.

After the House passed its CR, the Senate bogged down in "a spectacular, ever-deepening procedural snarl" over civil rights, school busing, gun controls, and tuition tax credits.^[70] The conflict began when the Supreme Court held, in Grove City College v. Bell, that federal grants could be withheld as punishment for sex discrimination only if that discrimination had occurred in the activity funded by the grant. Previous policy, upheld by lower courts, was to withhold funds if discrimination occurred anywhere in the institution; athletic departments were the prime example. Liberal and moderate legislators wanted to write the old interpretation into law; conservatives, led by Judiciary Chairman Strom Thurmond, used procedural means to block a vote in the Senate. Civil rights forces, led by Minority Leader Byrd, Senator Packwood (R-Oreg.), and Senator Kennedy, decided to attach the change to the CR. When Howard Baker did not object, Orrin Hatch (R-Utah) began delaying tactics. After a 92 to 4 cloture vote on September 29, Hatch and his allies began offering other amendments, for example, against busing, as both a semifilibuster and an embarrassment to the liberals.

On Monday, October 1, the Senate had to pass a two-day CR; the civil rights fight still blocked a vote on the real thing. On October 2, the liberals gave in: "Shame on this body, shame on this body," Ted Kennedy proclaimed, blasting Reagan for letting his conservative allies block the legislation.^[71] That left the Senate and House with a day to settle abortion, the Contras, the MX, and a perennial favorite, aid to Turkey (Greek-Americans object).

Howard Baker proposed another interim CR, but the Speaker refused.

On October 4, Reagan, who had seen no need to do so under similar legislative circumstances in 1983, shut down "nonessential" government agencies due to the lack of funding. Reagan blamed House Democrats. "Just once," he declared, "it would be great to have a budget on time." Furious Democrats pointed out that the delay was in the Republican Senate. Reagan, the Speaker charged, "stopped the government today not for purposes of good public policy but for purposes of melodrama."^[72] Democrats suspected the president sought a chance for an antispending demonstration before his debate with Walter Mondale on Sunday, October 7.

Congress passed a thirty-six-hour interim CR. All three rings of the budget circus—political posturing, budgeting without rules, and detailed budget making—were filled with activity as the CR battle continued in conference. On Friday, October 5, Congress passed another interim extension, and the conference stalled over the same issues.^[73] By Tuesday, October 9, the third interim CR was running out; Congress passed a fourth. "We are essentially in a state of gridlock," Senator Rudman declared. Stockman explicitly threatened a veto over water projects. He had long argued that users should pay more of the costs for such projects. "If we were to permit the approximately $6 billion worth of new projects in the tentative conference agreement to go forward," he wrote, "any future effort at reform would be virtually meaningless." In spite of the partisan politics surrounding veto threats, the water projects fight was a classic struggle over an important budgeting value: Who would pay for the "pork-barrel"? Spending advocates were using the famed "camel's nose" technique: by letting the start-up funding nose of the camel into the spending tent, one hopes the rest of the beast will follow. Stockman was objecting, as budget directors always will. Amid the fury over Nicaragua and Star Wars and after a year of totally convoluted process, the penultimate battle included a standard budgeting dispute that could have occurred twenty or one hundred years earlier.^[74] On Wednesday conferees finally settled, by scuttling the water projects and delaying Contra aid at least until February.

The Contra aid battle was to be fought again and again and again. Frustration would lead the administration into unwise maneuvers known as the Iran-Contra affair, but that is outside our story, except in one respect: the divisions over the Contras that so poisoned relationships were integral to larger ideological divisions reflected in funding disputes—defense versus welfare.

House Democrats proceeded with the compromise only after assurances that the White House would go along. Silvio Conte proclaimed that Reagan had no choice: "No way he could veto that thing now," the House Republican leader on Appropriations declared. "There'd be a

revolution up here if he did." Declaring "no limitation to their lust" for military (at the expense of domestic) spending, Hatfield blasted administration aides, accusing Democrats as well of "caving in," but in the end he went along. The battle had been reduced to Congress against the president; the CR passed by wide margins.^[75]

As in previous years, they settled by cutting spending that each side had desired. The deficit pressure made that the compromise of choice because members in the middle, undecided on policy, preferred not to increase the deficit. But on most issues majorities wanted to spend roughly what they were already spending, so there was little deficit reduction in the appropriations. Reagan got smaller increases in law-and-order programs than he wished. And Congress insisted on small real increases in education, mostly college student aid. The president was not about to take a strong stand against education funding in an election year.^[76] Other bills, such as transportation, were held to the Rose Garden standard of a very small real cut.

Congress, as always, liked the idea of cuts more than the actuality. The House had passed amendments for across-the-board cuts of 4 percent on Commerce-Justice-State-Judiciary, 3 percent on Interior, 2 percent on both Foreign Aid and Legislative, and 1 percent on Agriculture and Treasury. A 6 percent cut in the discretionary accounts of Labor-HHS-Education, however, went down 279 to 144, as 74 Republicans, including Conte, objected. David Obey mocked these proposals by offering a 64 percent cut on Agriculture; if you excluded defense and entitlements, he explained, you had to cut 64 percent of everything else to balance the budget. That's what all this posturing is about.

Throughout the year Republicans had tried to give the president authority to cut appropriations. Robert Walker proposed that Reagan be allowed to cut up to 10 percent from any account in the HUD-Independent Agencies bill. In late September, 51 senators proposed a temporary line-item veto; then they backed off. A similar proposal by Mack Mattingly (R-Ga.) had been kept off DEFRA, 56 to 34. Both Phil Gramm and Newt Gingrich proposed impoundment or veto authority on small spending bills early in the session, receiving 131 and 144 votes, respectively.^[77] Efforts to discharge the balanced budget amendment from House Judiciary gathered 190 signatures, not enough.^[78]

House Democrats proclaimed that balanced budgets were a great idea. "Any time the president wants to send up a balanced budget," Tip O'Neill promised, "I guarantee I will get it on the floor within 48 hours." So there! The House on October 2 adopted James Jones's motion requiring the president to submit a balanced budget to Congress. Republicans blasted the Democrats for gimmickry and then passed the bill 411 to 11. The Senate did not act.

Every year's deficit was adding another $20 billion a year to future interest payments—$20 billion, as someone put it, to the end of time. Although legislators voiced anguish about the deficit, the political forces favoring programs were too strong. As the election approached, even Reagan reversed himself on aid for debt-burdened farmers.^[79] He also supported legislation to guarantee social security COLAs if inflation stayed below the 3 percent trigger level. Congress's actions in reconciliation and on the Labor-HHS-Education bill showed that education and poor people's programs, if anything, were on the upswing. Legislation on social security disability or eligibility sent a similar message: Cuts that could make a dent in the deficit were nowhere in sight.

In a last burst of partisanship, the Senate defeated the debt ceiling on October 12, as Democrats forced Republicans to take responsibility for the deficits. Howard Baker even had to send Air Force jets to bring some senators back to Washington to pass the increase, 37 to 30. Members then went home to campaign. Pressured by Walter Mondale during the election campaign, President Reagan ruled out tax hikes and cuts in social security and medicare.

Otherwise, the election changed very little. It produced the same president and roughly the same partisan balance in Congress to deal with the same deficit. The president, who had downplayed the problem in the campaign, renewed his attack on social spending. Stockman released some more pessimistic forecasts that had been delayed until after the election. Congress prepared for more of the same agony. Frustration mounted. Indeed, so far as we can tell, frustration was the participants' most frequently used word describing the budgetary process.

Frustration could bring collapse; that had already happened to the budgetary process. Thus when 1985 began, there was adherence to neither institutional norms nor budget balance. Frustration could breed desperation. That too would soon be evident, as a "shoot-on-sight" budgetary mechanism called Gramm-Rudman-Hollings came into being. If thought would not bring balance, maybe thoughtlessness would. Out of frustration could also come creativity. Its name was tax reform. What it shared with Gramm-Rudman-Hollings was an overriding desire to show that, despite the circus we have just witnessed, the clowns could govern.