That's Cutting It Pretty Close

By George Church

A last-minute budget fight spins the federal wheels

Yes, Virginia, there is still a Government of the U.S. Or at least it looks as if there will be this week. Congress and the President played a political game of chicken through the end of last week over a "continuing resolution" that would renew the Government's legal right to spend money. But chances were that they would agree on a measure enabling the Government to pay its employees, sign contracts, send out benefit checks and perform all of its other functions--at least for the next four months.

Technically, that authority lapsed at midnight last Friday, when an earlier resolution designed to keep the money flowing expired. Bureaucrats tried to figure out just which activities the Government could legally continue without some kind of spending authority from Congress and which ones it would have to shut down. They produced only the most uncertain answers (see box). Chaos threatened.

In theory, that is. In practice, everybody assumed that the legislators would produce a resolution, and Ronald Reagan would sign it, before any real disruption occurred. But in Washington doing what everyone knows has to be done can be surpassingly difficult, and never more so than in this case. After a week of gamesmanship, House-Senate conferees were still struggling late Saturday to shape a measure that the President might accept. To get even that far, the Senate earlier had struggled through its first all-night session since 1978; some lawmakers caught naps on cots placed in a nearby conference room. Reagan, for his part, had threatened to cast the first veto of his presidency. He said, with considerable hyperbole, that doing so would "literally . . . shut the Government off," and he frightened enough legislators into believing he meant it that he seemed sure to win some of the spending cuts he desired--though it looked as if Congress might debate through Sunday, and perhaps even into Monday, before enacting them.

It should have been a drama of cliff-hanging suspense, a momentous showdown. But, in fact, an air of unreality hung over the legislative exercise. For one thing, the numbers became totally confused; there were loud arguments about how much the various resolutions under debate exceeded Reagan's spending targets.

As far as anyone could determine, the difference between Reagan and his congressional opponents finally came down to around $4 billion, less than 1% of the $415 billion provided by the House version of the continuing resolution.* Exclaimed Representative Richard Gephardt, a Missouri Democrat: "We're fighting over nothing!"

At times, the maneuvering degenerated into low farce. At one point, Senate Democratic Leader Robert Byrd introduced, and persuaded all those Democrats present to vote for, a series of taunting amendments to the continuing resolution. One would have declared the "sense of the Senate" to be that the budget had to be balanced by fiscal 1984, a goal that Reagan had long proclaimed but has now abandoned as unrealistic.

That ploy was designed to force Republican Senators to cast embarrassing no votes. The struggle seemed likely to be ended less by any hard-fought compromise of deeply held principles than by a weary desire on the part of both Congress and the President to get out of Washington for a Thanksgiving holiday.

Politically, however, the stakes were high. Reagan was out to burnish his public image as a stalwart foe of spendthrift Government. His opponents--this time including not only most of the Democrats but some of the congressional Republicans--sought to escape being labeled "budget busters" though still appearing to defend their constituents against cuts that would hurt the poor and disadvantaged. The outcome looked like a standoff. By the weekend Reagan's phenomenal streak of congressional victories had been broken, and he was prepared to settle for spending cuts well below those he had demanded two months ago. On the other hand, by brandishing his veto power, the President still was about to force larger reductions in social spending than many legislators wanted.

After persuading Congress to slash authorized federal spending for fiscal 1982 by $35 billion last July, Reagan in late September asked for more cuts. He urged Congress to trim an additional $13 billion when it actually got around to appropriating the money. But he never really made clear just which activities he wanted to slash. Congress, lacking guidance, passed a stopgap continuing resolution funding the Government from the start of the fiscal year on Oct. 1 until Nov. 20, an arbitrarily chosen date, while wrangling inconclusively over the regular appropriations bills.

By the start of last week, it was obvious that a second continuing resolution would be needed. It was also clear that Congress would never include in it all the cuts that

Reagan wanted. So the President on Tuesday sent a letter to Senate Majority Leader Howard Baker offering "to meet the Congress halfway" but clearly threatening a veto if the legislators refused to go at least that far. House Republican Leader Robert Michel of Illinois had already introduced a proposal that would have reduced social spending about $4 billion and defense outlays $2 billion.

The House voted down that bid 201 to 189, and passed, 195 to 187, a continuing resolution that the President's aides calculated would mean spending $8 billion more than Reagan wanted. It was the President's first significant congressional defeat, and it came about because the once solid Republican lines in the House broke. Eighteen Republicans from the Northeast and Midwest, part of a group that has nicknamed itself the Gypsy Moths, voted against the President because they feared further reductions in social services that their constituents value.

At the same time, the House vote was far short of the two-thirds necessary to override a veto, and Congressmen took the threat of a veto as no bluff. Said Senate Budget Committee Chairman Pete Domenici of New Mexico: "Reagan wants the Congress and the country to know he is serious about budget cutting." Within the White House, there were some qualms that a veto might make Reagan look like a wild man willing to produce governmental chaos if he did not get his way. Said one aide: "People might ask, 'What kind of guy is he? How far is he willing to go?' " But at a Cabinet meeting Thursday, most of the participants agreed that, having threatened a veto, the President could not afford to back down. Anyway, the chance to dramatize a struggle to hold down spending and deficits outweighed the risks.

By then, the struggle had shifted to the Senate. The debate droned on for two days while Majority Leader Baker on Thursday afternoon and evening huddled with both Republican and Democratic leaders off the floor. Eventually, he produced a compromise leaving defense outlays for the moment untouched and cutting civilian spending $3.3 billion, with a long string of exceptions: veterans' benefits, student loans and a child nutrition program, among other examples. A resolution embodying those proposals passed at 6:50 a.m. Friday. Exhausted leaders later Friday proceeded to a conference with their House counterparts that did not begin until 6:50 p.m. and was still in session late Saturday.

Even a presidential signature on a resolution will not end the battle. The Senate version of the continuing resolution runs only until March 30. The spending totals specified in the resolution are temporary and are supposed to be superseded by those in the 13 regular appropriations bills. So far, however, Congress has enacted only two very minor ones.

A third appropriations bill, for defense spending, is in good shape. The House last week voted by wide margins to include all the money that Reagan had asked for MX missiles and B-1 bombers. That cleared the way for quick passage of a $ 197.4 billion appropriation--$3.4 billion below Reagan's request, but $26 billion more than 1981. Other appropriations bills, however, are nowhere near enactment.

Moreover, Reagan has put off the really tough budget decisions. What taxes should be increased, if any? What cuts should be recommended in entitlement programs other than Social Security to prevent staggering deficits in the next few years? The Administration will decide those questions in January, probably under the shadow of a deepening recession.

Economic statistics last week etched dark portents. Housing starts dropped to the second lowest level on record. Personal income showed only a small rise, and consumer spending dropped. Murray Weidenbaum, Reagan's chief economic adviser, put on the record a prediction that unemployment might rise early next year to 9%, equaling the highest figure since 1941.

The recession will endlessly complicate the budget debate. How far is it safe to reduce spending in a slumping economy? On the other hand, is it possible to avoid gargantuan deficits that might reignite inflation whenever an upswing comes? Moreover, the entitlement programs that Reagan might reduce have large and vehemently vocal constituencies. To use a metaphor that Reagan might appreciate, the blood spilled in last week's battle was mostly special-effects catsup. The struggle beginning in January might well bring genuine gore.

--By George J. Church. Reported by Neil MacNeil and Evan Thomas/Washington

* The resolution does not include spending on "entitlement" programs, such as Social Security, welfare, Medicare and Medicaid. Estimated entitlement outlays would push total federal expenditures in fiscal 1982 to $710 billion compared with the target of $695.3 billion that Reagan set in March.

With reporting by Neil MacNeil, Evan Thomas

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