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Washington Sees Black And White in Effort to End Red Ink

By John DillinStaff writer of The Christian Science Monitor / February 22, 1994



WASHINGTON

A ``ZERO'' budget deficit. Voters say they want it. Most congressmen say they support it. But can the United States really lower its $235 billion deficit to zero by the end of this decade?

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Washington is gripped by that question as debate gets under way this week in the Senate on a proposed constitutional admendment to require a balanced budget. The measure is opposed by President Clinton.

Federal deficits, which soared to record levels in the 1980s, are headed lower for now. Mr. Clinton currently projects $176 billion of red ink in 1995, but concedes deficits will climb again in the late 1990s.

Despite public demands for a balanced budget, White House officials say, ``Whoa!'' Pushing too fast could mean layoffs for thousands of federal workers, cuts in Social Security, and damage to the economy.

``You can't take it all on at once,'' warns Alice Rivlin, deputy director of the White House Office of Management and Budget. ``But we are very committed to getting the deficit down.''

Supporters of the amendment, such as Sen. Paul Simon (D) of Illinois, look at the $3 trillion in new debt racked up under Presidents Reagan and Bush, however, and they are in no mood to compromise.

``History is likely to view the next few weeks as a turning point,'' Senator Simon says. The US will either move toward ``fiscal responsibility'' or race toward ``monetary disaster,'' he says.

The amendment is tough. ``Total outlays for any fiscal year shall not exceed total receipts,'' it says. The only exceptions: when 60 percent of the members of Congress vote for deficit spending, or when Congress declares war, or when the nation faces a military threat.

Opposite views

If the measure passes, there are two views of what will hap-pen. Sen. Robert Byrd (D) of West Virginia, an opponent, argues that it could bring financial, political, and legal chaos.

Typical of the comments made last week before Chairman Byrd's Senate Appropriations Committee were those of Donna Shalala, secretary of the Department of Health and Human Services. Ms. Shalala said if the amendment becomes law:

``First, it will jeopardize Social Security. Second, it will threaten the president's investment agenda. And third, it will kill real health reform.''

Budget director Leon Panetta predicts ``uncertainty and disruption'' if regions are hit by earthquakes, hurricanes, and other natural disasters. How could the government respond without the ability to borrow? he asks.

An opposing view comes from the Concord Coalition, an organization founded by two former US senators, Paul Tsongas (D) of Massachusetts and Warren Rudman (R) of New Hampshire.

In their study, ``The Zero Deficit Plan,'' they provide figures showing how the red ink can be dried up - with some sacrifices - by 2000.

The deficit that year is now projected to be $226 billion, according to the Congressional Budget Office.

The Concord Coalition trims that to zero in three ways: lower spending, higher taxes, and interest savings:

* Lower spending. Biggest savings come from a comprehensive means test for all entitlements, including Social Security and Medicare. On a sliding scale, families with incomes over $40,000 a year would get less. Retirees with incomes over $120,000 a year would see their Social Security payments cut by 85 percent. Total savings: $68 billion.

Other savings would come from raising the retirement age for Social Security to 68 (savings: $16 billion); eliminating nine programs ``no longer needed'' such as rural electrification (savings: $3.3 billion), and reforming federal pensions ($5.6 billion).

* Higher taxes. The big one is a 50-cent per gallon gasoline tax, which would raise $44.8 billion in 2000. Others include higher alcohol and tobacco taxes ($18.7 billion), and limiting home mortgage interest deductions to $20,000 a year ($7.2 billion).

* Interest savings. A balanced budget would save $35 billion in interest payments by the year 2000, the study indicates.

None of these are major sacrifices, Mr. Tsongas insists. These are only ``marginal'' changes. But failure to act would saddle our grandchildren with debt and be ``generationally immoral,'' he says.