TIME: Almanac 1993/TIME Almanac 1993.iso/time/100890/1008106.000

Text File | 1992-08-28 | 5.7 KB | 123 lines

                                                                                NATION, Page 49

Down to the Final Wire


Once again, Washington plays budget ball to the last minute

By LAURENCE I. BARRETT/WASHINGTON -- Reported by Michael Duffy
and Nancy Traver/Washington


    For nearly five months White House and congressional
negotiators haggled over ways to contain the deficit before more
havoc was wreaked on the economy and mandatory spending cuts
went into effect. But partisan sniping and a sheer lack of
political courage frustrated a deal. By last week the Oct. 1
deadline for the $100 billion sequestration had raised the
pressure to such suffocating levels that politics should have
been choked out of the equation. Instead the negotiations
grumped into the weekend amid fears that the pact made at the
top might be undone by the congressional rank and file.

    At times it seemed that the only consensus was on the need
to pare $50 billion from the deficit in fiscal 1991, which
begins this week, and $500 billion over five years. Achieving
those goals, however, demands distasteful medicine -- higher
taxes and reduced spending -- just weeks before congressional
elections. Putting added pressure on the negotiators were new
statistics underscoring how badly the economy is faltering. Last
week, for instance, the Commerce Department pegged economic
growth in the second quarter at an anemic 0.4%.

    A breakthrough seemed imminent early last week when one of
George Bush's most controversial proposals -- to reduce the
capital-gains-tax rate, ostensibly to stimulate economic growth
-- fell from the table. First, Senate G.O.P. leader Bob Dole
broke with the White House by proposing that capital gains be
separated from a larger deficit-reduction package. His House
counterpart, Bob Michel, joined in. "We're in trouble," admitted
a Bush adviser. "We got no support." Reeling from the
defections, the Administration lashed out at the Democrats. In a
campaign speech for G.O.P. candidates in Ohio, Bush
hyperbolically insisted that if the dreaded sequester were to
occur, "the Democratic Congress knows that it will be held
accountable." Retorted House Democratic whip Bill Gray: "We ask
him to stop acting like a party chairman and to start acting
like a President."

    But as the invective flew, the negotiators continued to
meet far into the night in House Speaker Tom Foley's conference
room. The "Gang of Eight," three from the Administration and
five from the Hill, inched forward by discussing a compromise
that would include a modest variation on the capital-gains
scheme: instead of a cut in the rates, the value of assets sold
would be indexed so that profits resulting from inflation would
be exempt from taxation.

    Progress stalled after the Democrats demanded a trade-off:
higher income tax rates on the wealthy. Budget Director Richard
Darman, Bush's chief representative, countered by calling for
large cuts in entitlement programs. Democrats were already
fretting about the possibility that Social Security, Medicare
and other programs with broad constituencies may have to be
slashed. Having earlier agreed to slicing $130 billion from
entitlements over five years, the Democrats retreated to $100
billion. For the moment at least, both parties were hiding from
reality in their familiar ideological bunkers: Republicans
trying to minimize tax increases, Democrats attempting to
protect popular programs. Over the weekend Congress worked
toward a short-term budget extension that would briefly defer
the reckoning.

    Thus for the fourth time in five years Washington had
failed to produce a budget by its own, self-imposed deadline.
All concerned concede that Washington-style budgetmaking is a
disgrace. Ideas for rationalizing the process, to curb both
spending mania and cliff-hanging melodrama, have been as
numerous as attempts to cure the common cold -- and just as
ineffectual.

    Bush continues to promote a constitutional amendment to
require a balanced budget. The President also pleads for the
line-item veto, which would permit him to excise specific parts
of large-appropriations bills. The proposed amendment is an
illusion: it would have to allow for unforeseen contingencies
such as war, and it would not have much impact for several
years. The line-item veto, a scalpel wielded by 41 Governors,
might be more difficult to use on the highly complex federal
budget.

    Some other proposed changes seem more promising, at least on
paper. Last year Republican Senator Pete Domenici of New Mexico
introduced a bill to shorten the ordeal. It would require the
President to submit a two-year spending plan, instead of the
current annual one, and to substitute a joint budget committee
for the present House and Senate units, which often disagree.
Most important, it would convert the budget outline Congress is
supposed to produce in April to a joint resolution requiring the
President's signature. That would foster serious early
bargaining between the White House and Capitol Hill. "Any
confrontation would occur up front," says Domenici, "not in the
days just prior to the new fiscal year."

    Ideas like these win applause from think-tank experts but
have failed to arouse much enthusiasm on Capitol Hill. The real
problem is not with the budgetmaking process but with those who
are in charge of it. The Gramm-Rudman-Hollings law was billed as
the magic bullet that would blow away both the deficit ogre and
the obstacles to orderly action. Gramm-Rudman has proved to be
a dud. Overhauling the machinery yet again would help only if
its operators were able to muster the will to run it properly.
But if they could manage that, no overhaul would be necessary.