Share this story
Close X
Switch to Desktop Site

Success and failure of Gramm-Rudman

Scarcely a year after Congress created the Gramm-Rudman balanced-budget act to help it slay a monstrous federal deficit, many lawmakers doubt that the historic law has worked as intended. The act has brought enormous election-year pressures to bear on lawmakers to slam the brakes on the fast-track growth of federal spending. This year's federal deficit has approached $230 billion; Congress is putting the finishing touches on a budget for the next fiscal year, beginning Wednesday, that ostensibly creates a deficit of only about $154 billion. And so, a six-year trend of steadily swelling deficits appears to have been reversed.

``It's been a success in terms of finally forcing a drop in federal spending,'' says Sen. Phil Gramm (R) of Texas, one of the bill's co-authors. ``People have been talking about reducing spending for years, [and] this bill's what finally made them do it.''

About these ads

But others say the law has not lived up to its earlier billing. Military spending was reduced slightly and the budget for domestic programs essentially held steady in 1985, they argue, before the law was passed. And while the deficit has been cut, they charge that Gramm-Rudman has masked some basic problems in the budgetmaking process.

Indeed, great tests of the budget act's effectiveness lie ahead, and key congressional budgetmakers of both parties doubt that the year-old law is up to the challenge. The bill took a beating earlier this year, when the Supreme Court struck down a key provision of Gramm-Rudman, one that would have automatically triggered across-the-board budget cuts in the event that the bill's deficit targets were not met. That removed the threat that if lawmakers didn't cut the deficit themselves, something else would.

``The decision took away a lot of the bill's real power,'' observes Sen. Lawton Chiles (D) of Florida, the top-ranking Democrat on the Senate Budget Committee.

Then came the tax-reform bill. As passed by the House of Representatives last Thursday, and as expected to be passed by the Senate this week and signed by President Reagan, it is supposed to dump as much as an additional $11 billion into federal coffers next year, all of which the White House insisted should be counted toward reducing the fiscal 1987 deficit. ``We lost the fear of Gramm-Rudman when it turned out the tax bill was going to give us that extra money,'' says Senator Chiles.

But the tax bill is likely to slice into federal revenues in following years, thus exacerbating the deficit. Many economists also predict that the law might cause a temporary economic slowdown, which would also reduce federal revenues and, thus, send the deficit up.

Finally, the spending plan being put into place by the 99th Congress brings the government into technical compliance with the bill's fiscal 1987 deficit target. Yet virtually all participants in this year's budget process expect the deficit to eventually climb much higher than that, perhaps higher than $180 billion.

So next year's budget-slashing tasks will be more onerous than ever. Gramm-Rudman sets a fiscal 1988 deficit target of $108 billion, which the law says cannot be exceeded by more $10 billion. Many lawmakers say that figure cannot be reached without a tax increase.

About these ads

``If you don't raise revenues, we're talking about an enormous cut in domestic spending,'' says House Budget Committee chairman William H. Gray III (D) of Pennsylvania. ``Without new revenues, that cannot be done.''

A tax increase, however, is something the White House has repeatedly said it would not abide by. To many lawmakers, Gramm-Rudman's inability to force the White House and Congress to accept a tax increase has been its central failure.

``Gramm-Rudman was supposed to force us to make the tough decisions,'' says Rep. Leon G. Panetta (D) of California, a member of the House Budget Committee. ``But it didn't force us to come to grips with the central issue: the need to raise revenues.''

Lawmakers had to make difficult choices between competing priorities because of Gramm-Rudman. Last week, House members voted not to restore the federal revenue-sharing program for local governments in their half-billion-dollar spending bill for the new fiscal year, because they would have had to approve across-the-board cuts to pay for it.

Yet they have also resorted to selling federal assets, clever accounting techniques, an expectation of increased tax-collecting vigilance, and the promise of additional revenues from the tax bill to bring the deficit just within $10 billion of the $144 billion fiscal 1987 deficit target.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.