Sliding By

No bipartisan agreement on how to eliminate the deficit was (or is) in sight. But by late 1987 the parties could agree, even if they could not quite articulate the point, on one thing: the nation's politicians were tired of fighting. More battles among the same players could only yield the same results. With an election coming up, it made sense to avoid trouble by limiting conflict. Besides, the election, by changing players, might break the budget logjam. Therefore the two parties (Republican and Democrat) and institutions (president and Congress) called an election-year truce over the two crucial issues, priorities and the size of the deficit.

The Balanced Budget Reaffirmation Act of 1987, otherwise known as the revised Gramm-Rudman, called for only small deficit reductions in FY89, and the Summit Agreement at the end of the year purported to meet those targets. As part of that agreement the contending parties also agreed on the totals for both defense and domestic discretionary spending for FY89. Good luck on the economy (it grew faster than expected), some artful posturing by the president (condemning the continuing resolution in his 1988 State of the Union address), congressmen's own disgust with budget chaos,^[5] and clever accounting (allowing Congress

to exceed the summit's discretionary spending target by about $2 billion by redefining what was discretionary) allowed Congress to meet the targets. The National Economic Commission would report after the election; neither party dared suggest serious deficit reductions in an election year; and the budget struggle was put on hold to await the new president. With the big issues settled in advance, Congress and the president managed to pass all the FY89 appropriations separately and on time: it is easy if you accept existing priorities and do not try to reduce the deficit.

The election, however, did nothing to break the logjam. The new president, George Bush, had most of the same commitments ("Read my lips: no new taxes" and a strong defense) as his predecessor, in addition to a few expensive new ones (a kinder, gentler, better educated and drug-free nation). The House and Senate remained solidly controlled by the Democrats. The Gallup poll just before the election found "reducing the federal budget deficit" to be the public's top priority (though it didn't say how).^[6] Meanwhile the National Economic Commission, reported to be at an impasse before the election, would prove unable to overcome the conflicts that had shaped deficit politics for a decade. Former Defense secretaries Caspar Weinberger and Donald Rumsfeld argued the military should not be cut to reduce the deficit; AFL-CIO President Lane Kirkland and other Democrats were reported to object to social insurance cuts; there was little talk about taxes.^[7] On March 1, 1989, the NEC submitted its report, really two separate reports, one Republican and one Democratic.^[8] The two sides agreed that the budget should be balanced excluding social security; that is, that the problem was even bigger, over $100 billion bigger, than Gramm-Rudman.^[9] Unfortunately but typically, they agreed on nothing else. As budgeting expert Allen Schick put it, "They agreed you have to cut the deficit by $230 billion. The only trouble is, they couldn't agree on where the first billion should come from!"

The NEC having failed, signs pointed to another budget donnybrook in 1989. There seemed no way to meet the Gramm-Rudman targets and no willingness to admit they wouldn't be met. Nearly a whole new team was in place: Richard Darman back in government as OMB director, Leon Panetta as chairman of the House Budget Committee, Senator Jim Sasser (D-Tenn.) chairing Senate Budget, Senator George Mitchell (D-Maine) the new majority leader, and of course a new president, George Bush. All were men of moderation and compromise. Led by the House majority leader Tom Foley (later Speaker after Wright resigned and left Congress), they began extensive negotiations, but there was no way to resolve their deep, substantive disagreements.

When the going gets tough, however, the tough get creative. The only

sensible response to the fakery of Gramm-Rudman is more fakery, and that's what the negotiators agreed to. On April 14 they announced agreement on a "framework" for meeting the Gramm-Rudman targets. CBO was projecting a baseline deficit of $147.3 billion for FY90; the negotiators claimed to get just below $100 billion.^[10] They accomplished this feat, however, with a remarkable combination of smoke and mirrors. The smoke, Representative Lee Hamilton (D-Ind.) explained, was "optimistic economic assumptions, or what might be called best case budgeting." The mirrors were various "accounting gimmicks" and false agreements. The 1987 revision of Gramm-Rudman, Hamilton pointed out, had created a neat division of labor. Congress gave OMB final authority over the economic forecast because "it is in our interest" to accept the inevitably optimistic forecast. And, make no mistake, it was optimistic: in the Blue Chip survey of thirty-nine private economic forecasts, none was as jolly.^[11] In this case, the smoke "saved" $19.9 billion.^[12]

The mirrors included nearly $11 billion in extremely dubious savings,^[13] at least $2 billion from continuing existing policies that were due to expire,^[14] $1.6 billion from the perennial lower interest costs and more efficient tax collection, and $5.3 billion in increased revenues. The latter sounded real but wasn't; the administration assumed the money could be raised by lowering capital gains taxes (memories of 1980!), while the chairmen of Senate Finance and House Ways and Means, Senator Bentsen and Representative Rostenkowski, refused to go along.^[15] In short, about $20 billion in the agreement, and the subsequent House and Senate budget resolutions, consisted of mirrors, to go with the $19 billion in smoke. Maybe $8 billion was real, and even that looked difficult.

Therefore, the most good anybody could find in the agreement was that it was better than nothing. "The most significant aspect of this agreement," Senator Mitchell declared, "is its existence. No one should be deluded into thinking that this is the end of the process. It is the beginning of the process."^[16] As Leon Panetta put it,

We are not going to adopt new taxes. We are not suddenly going to put [a] major burden on the spending side. We are not going to adopt [the Gramm-Rudman] sequestered budget. What are we left with? We are left with having to work around the edges as we did here…. We basically struggled to come up with what savings we could in order to, in a credible way, try to achieve the Gramm-Rudman targets….

The test of how good this agreement is will be how good the next agreement is. That is really what we are facing in terms of goals that we have outlined in this budget resolution.^[17]

In other words, as summarized by a number of congressmen, "Wait till next year."

The obvious question was, "Why should next year be any different?" Well, maybe George Bush would figure his campaign promise not to raise taxes expired after a year. Or, the trust built in sliding by the FY90 Gramm-Rudman target together would help Congress and the president to confront the really impossible FY91 target of a $64 billion deficit. If politics only were a matter of politicians who liked each other ignoring principles and constituencies, of course, you wouldn't be reading this book.

It is common to call for tough choices. And choosing is, indeed, required. But a choice is tough only because both sides are equally (un)attractive. Those who call for toughness think only one choice, balance, is acceptable. Would that it were so, for then choice would be easy.

Defending what even Representative Panetta called the "slide-by" FY90 budget resolution, Representative Lynn Martin (R-Ill.), a loyal Republican and hardly a "spender," nicely described the difficulties she and her colleagues faced:

Mr. Speaker, let's face it. No matter how we make our budgets, somebody is going to feel left out, frustrated, angered, and resentful. In fact, as the former acting ranking Republican on the Budget Committee, I can testify to the thankless task budgeting is. Not only can't you please everybody; you actually manage to anger everybody in one way or another. Either you are spending too much on defense or too little; and you are always slighting the hundreds of underfunded domestic needs programs. When you are slicing up such a limited pie to begin with, everybody goes home hungry and angry.^[18]

We have said it before; it must be said again: the deficit is high because reducing it will have serious adverse consequences for virtually everybody, and therefore for the country as a whole. Until that fact is faced; until politicians, the media, and the public admit that the difficulty is not a lack of courage or insidious "special" interests dominating the "public" interest, debate will remain distorted and unproductive.