Preface
The Era of the Budget

Political time is counted not in years but in issues; a political era is defined by the concerns that dominate debate and action, so that about other issues we ask: How does that affect———? Before the Civil War, all issues were subsumed by slavery; the tariff, internal improvements, territorial expansion were approved, opposed, or manipulated according to their perceived impact upon the battle between the "slave powers" and the free states. At the turn of the century, industrialization and the rise of giant corporations posed the challenge; conservation, antitrust legislation, and modernized government were part of the response. The Great Depression defined the 1930s; after 1945, the cold war cast its shadow over domestic politics as well as foreign affairs. The civil rights movement shaped the 1960s in ways too obvious to be seen at the time. Rights were expanded, grievances redressed, and authority, whether public or corporate, was continually called into account. Those themes carried over from the enfranchisement of blacks to the women's movement, the expansion of the welfare state, and even environmental concerns. Could institutions unable or unwilling to provide social justice, the reasoning went, be trusted to protect nature's bounty against dangers stemming from technology?

Now we are living in the era of the budget. The budget has been to our era what civil rights, communism, the depression, industrialization and slavery were at other times. Nor does the day of the budget show signs of ending.

Budgeting has always been important; it is a process by which resources are acquired and allocated to the vast array of activities that make up our national government. Presidents and Congresses have had bitter clashes. Richard Nixon's tactic, impoundment, was considered as an article in the bill of impeachment. A horror of deficits is deeply rooted

in American political rhetoric and belief, and blame for deficits has been a staple of political combat. Fights about the budget are not new.

What is new is their ubiquity. Year after year the key question has been, What will the president and Congress do about the deficit? Virtually all other issues are discussed and decided in terms of impacts on the deficit. Defense, for example, is discussed in terms not of strategy and needs but of the deficit and "fair shares" of the budget. For example, when Ferdinand Marcos was overthrown in the Philippines and replaced by Corazon Aquino, the new leader received a standing ovation from Congress, but her request for substantial aid was denied. The deficit mattered more.

That much is easy to see, but there is more. Budget worries shape the ways politicians make decisions. Congress and the president consider programs in terms of not only what they do or who they help but also when they spend the money. The appropriations committees meet targets for outlays by cutting quick-spending programs like military payroll instead of slow-spending ones like new aircraft carriers—even though both staff and committee members believe personnel and maintenance are more important than new procurement. As budget worries distort decisions, they combine with grave disagreement over priorities to distort procedure. More and more policy choices use two new, giant budgeting vehicles: the reconciliation act and the continuing resolution. Authorizers feel they are losing power to appropriators, who agree. Budget fights have "put things in such chaos," a House appropriations leader explains, "that in the end [the Appropriations Committee] is more powerful than before. Not by design but by dumb accident."

Not by design, but not quite by accident either, budget politics has shaped the wider conflict between the two political parties. Before Ronald Reagan took office, concern about the deficit's supposed effect on inflation and disagreement about military spending split and demoralized the Democratic party. Democrats lost both their rationale and their argument as to how spending programs, which served their constituents, were good for the whole nation. By 1984 Democratic presidential candidate Walter Mondale was campaigning on a promise to raise taxes so as to lower deficits. The strategy was so strange and unsuccessful that we might miss its significance: the Democrats were not sure what else to say. As for the Republicans, their problem has not so much been unpopularity; though they lost the Senate in 1986, they were better off than they had been for most of the postwar era. The Republicans' problem was guilt. After careers of inveighing against deficits, Republicans found themselves in charge of the worst deficits in history. A few, like Jack Kemp, didn't care. But most, like Bob Dole, did. As the budget

bind wore on, Republicans in Congress grew more and more desperate for a way out.

The deficit became a crisis of confidence for political leaders. Members of Congress particularly saw it as a test of responsibility, of their ability to govern. Their own self-criticism was amplified by the establishment press and academic economists. The public agreed, but the public also objected to almost any action. After all, nothing terrible had happened yet. Why risk recession or savage welfare or undermine defense when no such drastic action appeared called for? The public was willing to cut "waste," but the politicians believed they had to cut programs or raise taxes. They bewailed deficits so loudly largely to convince the public to accept some pain in the interest of deficit reduction, but the public wasn't buying. Caught between their own rhetoric (and beliefs) and the limits of public support, politicians did things that made them feel even worse. Both president and Congress cheated in budget assumptions. They made fake cuts, such as changing a payment date from the last day of one fiscal year to the first day of the next. At the height of their panic, the politicians passed Gramm-Rudman-Hollings—a piece of legislation best described as budgetary terrorism, only this time the hostages were their own keepers.

Budget stalemate generated a desire to demonstrate a capacity to govern that led to radical changes in tax and expenditure processes. The main theme was the public interest in deficit reduction versus the nefarious private interests in self-aggrandizement. Our book issues a fundamental challenge to this "politicians-as-fools-and-cowards" thesis.

As we write, the budget battles have hit a bit of a lull. President Bush and Congress have called a cease-fire. Calm, however, is not comfort. On Capitol Hill the staff and members of the appropriations committees agonize more than ever about how they will produce bills that have enough programs but a small enough total to get through Congress. Off the Hill, in the cold shadow of the stock market's "Black Monday," economists, journalists, and other policy elites talk about the dangers of a financial crash if the deficit is not "fixed." These worries may be overstated, but they are pervasive enough to assure that the next few years will be as beset by budget difficulties as were the last year of President Carter and the eight years of President Reagan. And that is if there is not a recession. The era of the budget is not nearly over.

If Americans are going to live with the dominance of budget politics, they had better understand it. We write this book to help both citizens and politicians understand what has been going on, why it has happened, and therefore what we may reasonably expect to happen next. Part of our concern is with matters of fact. Who did what to whom? Why? What

are the sides and the goals of the players? As best we can tell, what are the effects of the deficit? Where did it come from? These questions of fact then shade into questions of evaluation.

Evaluation can look like blame: Who is responsible for the deficit? But it is not just personal or partisan. Above all, we must understand what are reasonable demands of our political system. We agree with our politicians that the overarching question about deficit politics is whether our institutions and the people in them have behaved in a way that, given no democracy can satisfy everyone, is worthy of support. Ironically, we are more understanding of the politicians than they are of themselves.

The battle of the budget is a story of congressional horse-trading, partisan posturing, and technical tricks that affect billions of dollars. It is also a story of politicians operating within constraints set by both public opinion and political interpretations of economic reality. Throughout our story politicians were being told that the financial markets demanded one policy or another; as custodians of the economy, the government had to go along. We assess those claims, finding great reason for skepticism. Whether right or wrong, however, beliefs about how the budget affects the economy were and are a major part of budget politics. We therefore emphasize those beliefs—the "responsible opinion" represented in the pages of Time, the Washington Post, and other "powers that be" and stated with authority by "expert" economists. What these organs say is not simply "reporting" but a political fact. Politicians, like the rest of us, get opinions from experts and media stories; politicians, unlike the rest of us, have to worry about how the media will represent them to the public. For both reasons—the media as a source of opinion and as a shaper of it—the media view of what is required by the public interest influences political action.

Some of our facts will probably surprise most readers. Few people realize how much politicians, particularly members of Congress, have done about the deficit. They seem to have done little only because the problem was much larger than anyone realized. Each year's progress was diminished by each year's bad news. The budget cutting or defense buildup began not with Reagan but with Carter. And Reagan's victories in 1981 were primarily due to neither his great political skill nor positive public support. Far more important were the election of a much more conservative Congress than had existed before and a more negative desperation among the public, which made Democrats leery of seeming to obstruct. In these and other matters, we try to set the record straight.

Yet our evaluation may seem even more surprising. We see plenty of gimmicks, foolishness, and deception. But the crux of political understanding and practice is appreciating the many legitimate goals that people bring to a choice. Budgeting involves meeting obligations, keeping

promises. It involves choices about values, about which purposes are of highest priority. It involves questions of power: How are we to be governed, and by whom? Most of all, tax and spending decisions involve real people with real pain and real benefits. What happens to any of us—the fate of farmers, the poor, or General Dynamics—may have meaning to others. In the rhetoric of deficit reduction, these other matters are either disparaged as "special interests" or, worse, ignored. Persistent deficits are blamed on a lack of courage or good will. Wrong. Deficits persist because all choices are bad. Choices are hard because important values are helped or hurt by all alternatives.

We admit to a prejudice in favor of understanding other people's values. Not only is that our business, but we two disagree on much. One voted for Ronald Reagan; the other would vote for any Democrat, the more liberal the better. We do not believe that understanding political differences requires downplaying conflict. Instead, we emphasize the real differences of interest and ideology behind the convenient rhetoric of "public" versus "special" interests. Naturally all sides think they are the public and the other guys are the selfish special interests.

Rather than clearly distinguishing between private and public interests, much of politics focuses on defining the relationship of the respective spheres. Thus the battle of the budget is largely about defining the role of the government and its relationship to the people: which responsibilities with what priorities—managing the economy, protecting the poor, defending the nation—are things "all good people" should support. All good people do not agree; that's part of the problem. Because people define their private interest as the public interest, they become self-righteous; yet political debate has to work that way.

At bottom, the budget battles are about what kind of country we want to be, expressed through what kind of government we will have. Whether the deficit will be diminished as a proportion of national product at high or low levels of taxing and spending will make a significant difference in the kind and quality of public life. Whether the struggle over the deficit leaves us with enhanced respect for the procedures and institutions through which we attempt self-rule or destroys our respect for government may well matter as much or more than the outcomes of specific issues. All of us have heard of extremists of the right or the left. Extremism of the center, defined as disregard and belittling of established procedures and institutions in the name of a transcendent goal, such as budget balance, is a new and troubling phenomenon we wish to bring to public attention, partly because everyone else sees it differently or not at all. Procedures are not considered a problem, but big deficits justify radical change.

This book is the story of how budgeting overwhelmed governing. We

describe and discuss the ramifications of events in the economy, among the electorate, and in the policymaking processes of Washington, D. C. We hope to have captured the feel of events, the mood, because a growing frustration with budgeting became a factor in itself. Throughout we try to discern the real stakes behind the rhetoric. We emphasize why choices were so difficult.

In the end, we ask the big questions: What does this story tell us about our capacity to govern? Is ours a system, to quote Adlai Stevenson's definition of democracy, in which "the people get the government they deserve"? Can a government by the people and for the people have the authority to be a government of the people? Or does the budget impasse show that the more our government represents us, the less it can govern?