What Hath Gramm-Rudman Wrought?

There were four main provisos to the Balanced Budget and Deficit Reduction Act of 1985: (1) statutory deficit limits starting at $172 billion in FY86 and hopefully ending at zero in FY91; (2) sequester orders that apply if Congress and the president cannot agree on an alternative budget; (3) an accelerated budget timetable; and (4) procedures, such as offsets, to keep Congress honest when it votes on tax and spending bills. Guess what? They missed the targets, did not sequester, did not follow the schedule, and, though the offsets had some effect, were less honest than ever. The reasons were predictable: all the incentives in GRH worked to make delay strategically advisable; too much was taken off the table; the reason the act was passed in the first place—inability to agree on the budget—caused participants to seek their own solutions rather than compromise; and, at the last moment, the only option was to obfuscate. Obviously, GRH did not force the major actors to come together; they merely found it easier to agree on palliatives and gimmicks that might prevent sequester. What is worse, combined factors—anticipating revenue losses from tax reform, meeting the 1987 requirement by pushing costs into the following year, using the $10 billion cushion, and initially deciding to eliminate a huge deficit in just five years—led to an estimated $65 billion to $75 billion deficit-reduction requirement for FY88, a target that no one believed could be met. And it wasn't.

Though GRH made only a modest dent in the deficit, that is not to say it was totally ineffectual. It reinforced norms of spending restraint. GRH's internal controls were generally supported in the House and Senate, except for the Senate's decision to exceed its budget resolution in order to fund the antidrug bill. Such constraint may not have been a great idea. David Rogers reported efforts to increase foreign aid for the Philippines, where the U.S. wanted to aid Corazon Aquino's new democracy, were impeded because of Gramm-Rudman. "Competing foreign policy interests," he wrote, "feared that any increased allocation to the Philippines would hurt their budgets."^[45]

Within the executive branch, Budget Director Miller observed:

One of the things that has been very useful to me in dealing with the agencies is to say look, Gramm-Rudman-Hollings requires offsets. So agency X comes up and says, "We need a supplemental [appropriation]—we

forgot that we're going to have more expenditures for this entitlement program." Someone's going to say, "OK—but you know you have to have offsets. Now where are you going to take it out?" So when we send up a supplement [request], we send up a rescission at the same time and try to tie the two together. Or we try to say, "OK, what you do is you go reprogram [funds]." That's been very useful to us.^[46]

But surely it has been less useful to the appropriations committees and agencies. Conflict raged over offset requirements particularly in the Senate as these were stronger than in the House. But the offset requirements remained, shaping budget battles in 1987 and 1988, and probably will continue to do so.

The targets, of course, were virtually impossible to hit. In spring 1987 only a few Republicans (such as Bill Gradison) were willing to admit that; thus, Senate Democrats had to resort to disingenuous movements to get a resolution with higher deficits past the three-fifths point of order in that body. They managed to pass a conference agreement that required "only" the original deficit reduction amount of $36 billion, rather than the much larger amount needed to get down to $108 billion. But to no one's suprise, "only" $36 billion was no easier in 1987 than in 1986. In September 1987, therefore, the Democrats put together a new version of Gramm-Rudman that the president, after much public protest, declared himself compelled to sign.

The new bill was another mixture of hostage taking and posturing. It provided a new deficit-reduction schedule that required a $23 billion cut in FY88 and then skipped FY89 (the 1988 election session) before resuming in FY90. It gave OMB sequester authority but under very restrictive rules. The Democrats thought the $23 billion sequester, over half from defense, would force Reagan to raise taxes. Republicans agreed, so the GRH revision had mostly Democratic support. But everything still depended on the base from which the sequester would occur, that is, the terms of the CR. If anything, the president still seemed better off with a sequester than with any negotiated settlement: the sequester did not threaten to undo the most important policies of his administration, the marginal tax cuts.

Thus, nothing much had changed: all roads still led to gridlock. The only difference between 1986 and 1987 was that constraints had become even tighter.^[47] The increasing squeeze did have one real victim in 1986. Jamie Whitten's efforts to extend revenue sharing for another year at $3.4 billion raised the question of whether Congress could ever rid itself of a program. Most members were reluctant to risk the ire of local government officials who, especially in oil-dependent regions, were finding it harder to make ends meet; and few wanted to challenge Whitten. But

what could be cut instead? Speaker O'Neill rode to the rescue ("I will always remain a man of the House," he said at his retirement farewell when Congress adjourned). The Speaker persuaded the Rules Committee to strip revenue sharing from the Omnibus Appropriation Act.^[48]

Deficit pressure could put some very bad ideas into the heads of agency chiefs. Worried about what a GRH sequester would do to his department, Deputy Secretary of Defense William Taft came up with the idea of delaying payments to contractors under the grace period offered up by the (apparently misnamed) Prompt Payment Act; this would "save" $2.8 billion in fiscal 1987 outlays that thereby would go into fiscal 1988—for somebody else to worry about. But the chair of House Government Operations, Jack Brooks (D-Tex.), and its ranking minority member, Frank Horton (R-N.J.), responded in outrage—private vendors already were refusing government business or charging more because of late payments; moreover, they threatened to legislate total removal of the grace period that had been originally intended to help agencies smooth out their payments.^[49]

In 1987, as the pressure increased, the appropriations committees finally ran out of room to maneuver. Even the smaller cuts required by the resolution were more than they could manage by their usual techniques of scrimping on administrative expenses, stretching out purchases, and the like. They left whole agencies out of bills in protest against what they considered impossible targets; the prospect of another sequester just made matters worse. The evil day when across-the-board cuts made programs unmanageable was approaching. Yet the deficit persisted.