A Bad Idea Whose Time Has Come

By Otto Friedrich

"But not on us!" the oysters cried,

Turning a little blue.

"After such kindness, that would be

A dismal thing to do!"

--Through the Looking-Glass

If the shrieks reverberating through Washington last week were considerably louder than the murmuring of some doomed oysters, that was because the victims are larger and more numerous and more sensitive to threats of pain. Congressional oratory turned to images of mayhem. "Today's cuts are like trimming your nails," said New York Democratic Congressman Charles Schumer. "What is coming will be like chopping off your hand." Pennsylvania Democrat William Gray, chairman of the House Budget Committee, spoke even more gorily to the New York Times of "the amputation of both arms in 1987," and Senator Gary Hart of Colorado predicted, "We will cut off our nose to spite the deficit."

What they and the rest of official Washington were talking about was a novelty called Gramm-Rudman.* Passed by a harried Congress and signed by an equally harried President Reagan during the confusions of the pre-Christmas season, Gramm-Rudman decreed an end to the budget deficits that have become a Washington way of life over the past two decades. Right now. Congress knows that the deficit must be cut, but naturally dreads deciding on its own whose funds should be cut. So the legislators left it to U.S. Comptroller General Charles Bowsher to trim $11.7 billion from this year's budget. Then beginning with the fiscal-1987 budget that Reagan must submit next week, the restrictions become automatic. Discretion, choice, judgment--all are subordinated to the rule imposed by Gramm-Rudman that the deficit must be reduced in $36 billion increments each year until 1991, when the lion will lie down with the lamb and the deficit will total zero. The new law even dictates that half of the current cuts are to come from military spending (to be trimmed 4.9%) and half from nonmilitary outlays (4.3%). But not from us, the oysters began protesting.

Not us, cried the retired military veterans and civil servants, who expected to get a 3% cost of living increase in their pensions Jan. 1 but did not. Not us, cried the farmer organizations, whose hard-pressed members expected $20 billion in subsidies this year and now see that harvest shriveling. Not us, cried the operators of the New York City subways, who have no hope of keeping fares at $1 if they lose their subsidy of $550 million. Not us, cried the Nicaraguan contras, who got only $27 million in "nonmilitary" aid last year and now want $100 million, with $60 million for real weapons. Not us, cried the Internal Revenue Service, which after all collects the money.

Yes, you, all of you, replied the budget cutters. In a 419-page

report issued this month, they surveyed every corner of the battlefield and listed the reductions, officially known as "sequesterings." Not only will the Pentagon have to cut $543 million from Air Force missile procurement and $532,000 for such a minor specialty as a tank muzzle boresight device, but there will be $54,000 less for the modernization of dining facilities at Fort Knox, Ky. And so on. In the field of nonmilitary spending, the figures provide a kind of guided tour through all the sunny hillsides and dark thickets of federal benevolence: $2.4 million less for the National Endowment for the Arts; $15 million less for the Panama Canal Commission; $8,000 less for the National Afro-American History and Culture Commission; $28,000 less for the National Council on the Handicapped; $31,000 less for the Marine Mammal Commission. And so on. "It's going to be tough, tough, tough on everybody," says Co-Sponsor Hollings.

The most bizarre aspect of this arbitrary budget cutting is that few people in Washington think it will work very well. Almost nobody thinks it is the right way to run the Government. And quite a few people think it is illegal. No sooner had Gramm-Rudman passed than twelve Congressmen joined the Naderite Public Citizen Litigation Group in asking the Federal District Court in Washington to intervene. And though Reagan had just signed the bill and called it "an important step toward putting our fiscal house in order," his Justice Department filed a brief saying that it also thought parts of the measure probably unconstitutional.

In Congress, too, there were efforts to change course. A group of liberals led by Ted Weiss of Manhattan formally proposed last week to repeal Gramm- Rudman outright, an unlikely eventuality since it got through the House by a 271-to-154 vote and the Senate by 61 to 31. "Budget cuts of this size," said Weiss, "will force us to dismantle the Federal Government, step by step, until there is little left."

For the present, though, this act--which threatens to delegate Congress's most important function to unelected bureaucrats, which jeopardizes the most vital activities of the Government, which impoverishes good programs as ruthlessly as bad ones, if not more so--remains the law of the land. "It won't go away," says House Majority Leader Jim Wright. "We set out to create a straitjacket to force the President, and Congress too, to face unpleasant facts."

If Gramm-Rudman is a foolish piece of legislation, and it is, it did not come from nowhere. It came most immediately from the fact that the U.S. was going bankrupt at the end of last year. Specifically, at midnight on Dec. 12, the money would run out--no more cash for either the White House or the Marine Mammal Commission. The only way to avoid going into default, meaning an almost unthinkable inability to meet federal payrolls, was the all too familiar trick of raising the limit on the national debt.

When Reagan first came to the White House in 1981, he found that Jimmy Carter had left the cupboard quite bare, and that one of his first acts would have to be to increase the national debt past $1 trillion. What an outrage, especially to a cost-conscious conservative! A trillion dollars--why, if you piled up that many $1,000 bills, Reagan told Congress, you would have a pile 67 miles high! "A monument to the policies of the past," said the new President, "which as of today are reversed." But since Reagan was also determined to increase military spending and to cut taxes (and since Congress was just as determined to stand guard over Social Security and other entitlement programs), there was only one way to balance the budget, and that was by borrowing. So five years of Reaganomic prosperity have been financed by doubling the national debt from $1 trillion to $2 trillion.

Warnings about debts and deficits tend to go ignored as long as things seem prosperous, but there have been signs of increasing worry lately. Just paying the interest on the national debt now takes $143 billion, much of it going to foreign banks that can call in their loans whenever they begin to mistrust the dollar. Worriers also fret that the trade deficit has climbed to a scary $145 billion or so annually. Meaning that it is now the U.S., not Mexico or Brazil, that is the world's biggest debtor nation. And banks keep crumbling (120 of them went under last year). This does not mean that we are approaching 1929, of course, but as Lester Thurow of M.I.T. wrote last week, "Farm bankruptcies, financial speculation, nonperforming loans, large potential defaults . . . the echoes of the Great Depression sound louder and louder."

So as the Government steamed titanically toward default on Dec. 12, congressional leaders decided that they dared not seek approval for yet another increase in the debt unless they could show that they were really doing something about the chronic deficit that nobody wanted to pay for.

Lo, the Gramm-Rudman bill! This simplistic cure-all had been lying around since last summer, gaining a modest amount of support. Now, as an amendment to the bill increasing the debt limit, it became what Co-Sponsor Rudman wryly called "a bad idea whose time has come." There was no time for committee hearings; many members never read the measure that gave away their responsibilities, but they overwhelmingly voted for it; final approval came at 10:15 p.m. on the eve of the prospective default, and then it was soon time to go home for Christmas. Yes, Virginia, there is a Santa Claus.

January is when the mail brings Christmas bills, and so the authorities began taking another look at the new law that Senator Pat Moynihan described as "a suicide pact." Although it had a beautiful simplicity, with its annual series of automatic budget cuts, nothing could possibly be that simple. The interest on the national debt had to be paid in full, for example, and if the Pentagon had just signed a contract to buy a million widgets, it would still be obligated to pay even if it canceled the contract. O.K., these were exempted.

Then came the political commitments. Reagan had repeatedly promised that he would not cut Social Security, so Social Security would have to be exempted too, and he also exempted military payrolls. As this kind of budget-eve bargaining agitated Washington last week, it was clear that the oysters with the strongest political power would indeed escape injury--at least in the first round--but other cuts would then have to be correspondingly deeper.

Senator Pat Moynihan asked Comptroller General Bowsher, at a hearing last week, whether the various exemptions did not mean that the vulnerable areas of domestic spending will actually have to be slashed by a devastating 25% next year and vulnerable defense outlays by perhaps 18%. "That's in the ball park," said Bowsher, thus conjuring up a ball park stripped of seats, gates and outfield fences.

Last week's negotiations are nothing, however, compared with the coming struggle over taxes. For Gramm-Rudman does not command specific budget cuts; it only commands that the Government stop spending money it doesn't have. So why can't taxes be raised? Mainly because Ronald Reagan is passionately opposed to raising them, and because House Democrats, whom Reagan likes to blame for past increases, will not cooperate unless Reagan asks them to do so. Reagan will have to "take the hard knocks," as Speaker Tip O'Neill put it. Or as one Senate G.O.P. strategist suggested, "We all have to join hands and jump off the cliff together."

Washington optimists--and there still are a few--like to view Gramm-Rudman as nothing more than a device for applying pressure. As they see it, when the pressure gets high enough a few months from now--meaning when enough special- interest groups rise in rebellion against the threatened cuts--there will occur, as if by magic, what former Budget Director David Stockman used to call "the big fix." This comes when everybody reluctantly agrees to both some budget cuts and some tax increases. One formula being mentioned is known as 20-20-20, meaning $20 billion in new taxes and $20 billion less for both military and nonmilitary spending.

No way, says the President, and although he is famous for last-minute concessions to sweet reason, he is also famous for last-minute obstinacy. And in addition to budget cutting, he sees all kinds of possibilities in "privatization," the selling off of Government assets (like grazing lands) and reducing of Government functions (like mortgage insurance). "The crystal ball is cloudy, but the political elements for the big fix are probably not now present," reports TIME National Political Correspondent Laurence I. Barrett. "In Congress, there is too much dissension within each House and within each party. In the White House, there is serious question whether Reagan fully understands what is involved. There is also a dearth of both acumen and independent thinking around him. If this analysis is correct, there is good reason to believe that Gramm-Rudman will turn out to be either a means of ravaging many Government functions, including quite legitimate ones, or a malign illusion that merely defers the real day of judgment on the deficit."

First, though, there remains the possibility that the judiciary will save Congress from itself. "There is no way this thing can be made constitutional," says Alan Morrison, the attorney handling the suit to stop Gramm-Rudman. "It's diseased." But when the case was argued before the Federal Court of Appeals in Washington on Jan. 10, Judge Antonin Scalia outspokenly challenged Morris' view that Congress could not delegate its funding authority. "Congress often delegates to the Executive difficult questions that it would rather not grapple with," Judge Scalia said. "I don't see how you can say that Congress hasn't made the tough judgment. They've made a judgment to balance the budget."

Though a rigid application of that law would indeed threaten to put the Government out of business in a lot of ways, there are perfectly sensible people in Washington who see the act as primarily a way of making all branches of Government rethink what the Government does and what it is willing to pay for. "We need a reordering of the relationship between the Federal Government and the people," says Gramm, and that is a view that many can endorse.

Looking back over the long accumulation of deficits, which stretches back to the last balanced budget in 1969, Florida's Democratic Senator Lawton Chiles acknowledges that "we always seem to come up with a new slogan to patch over gaps in our willpower." And looking ahead to the dangers that Gramm-Rudman may bring, Wisconsin's Republican Senator Rudy Boschwitz says, "It is perhaps a little mindless, but it may be the only way out of the morass." All of which is another way of asking, If Gramm-Rudman is too arbitrary, what is going to get the Government off the road to bankruptcy? Oysters, anyone?

FOOTNOTE: *Republican Freshmen Senators Phil Gramm of Texas and Warren B. Rudman of New Hampshire actually have a better-known co-sponsor, Democrat Ernest F. Hollings of South Carolina, but two sponsors' names are generally about all that people want to remember. Purists call it Gramm-Rudman- Hollings, or GRH. Officially, its name is the Balanced Budget and Emergency Deficit Control Act of 1985.